D Question 2 1 pts In class we discussed the concept of Total Landed Cost, which
ID: 378409 • Letter: D
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D Question 2 1 pts In class we discussed the concept of Total Landed Cost, which is simply adding all the costs associated with acquiring and getting that product to market in a given distribution channel. (There are a couple of videos posted in CANVAS on this as well). In figuring Total Landed Cost, we are concerned with the costs on a "per unit basis" and then we also look at how much each step in the supply chain adds to that unit cost - -the incremental cost added by each step in the supply chain. Consider the following example: Colnago USA manufactures high-end racing bicycles and is looking for a source of gear sprocket sets. Colnago USA would need 1,450 sets a month to meet demand. Channel A includes a domestic supplier while Channel B and Channel C include overseas suppliers. Cost information for each of the channels is as follows: Price Per Set Packing Cost per Set Total inland freight Total international transportation costs $300 $286 $273 $4.00 $7.50 $6.00 $600 $1,000 $1,200 $5,500 $7,000Explanation / Answer
Total landed cost of channels on per unit basis= price per set + packing cost per set + total inland freight per set + total international transportation cost per set.
Channel A= 300+4+(600/1450) = $304.41
CHANNEL B = 286+7.50+ (1000/1450)+(5500/1450) = $297.98
CHANNEL C= 273+6+(1200/1450)+(7000/1450) = $ 284.66
CHANNEL C WOULD BE PREFFERED AS IT HAS THE LOWEST TOTAL LANDED COST.
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