ble machine parts from Baltimore to Kuala Lumpur, Malaysia, are (1) use a ship t
ID: 379116 • Letter: B
Question
ble machine parts from Baltimore to Kuala Lumpur, Malaysia, are (1) use a ship that will take 30 days at a cost of $3,620, or (2) truck the parts to Los Angeles and then ship at a total cost of $4.900. The second option will take only 22 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year Alternative 1 of $(Enter your response rounded to two decimal places.) b) What issues are not included in the data presented? O A. For each additional day t takes to deliver the pants, customer satisfaction is likely to decrease O B. For each additional day it takes to deliver the parts, you forgo the interest you could have eamed on the O C. For each additional day it takes to deliver the parts, total fuel costs for shipping increase. O D. All of the above. O E. Only A and B. i payment. 12/12/17 11:59pmExplanation / Answer
Value of the machine = $98090
Holding cost is 30% of value= 98090*30%= $29427
Daily holding cost- 29427/365=$80.62
In 1 case- daily cost= 3620/30=120
Daily holding cost is $80.62 so for 1 day it will be 120*80.62=$200
Total cost=200*30=6000
In case 2- 4900/22=222.72
Adding after holding cost – 222.72+80.62=$303.34
Total cost= 303.34*22=6673.48
Day saving is 8 days. If company is selecting 1st option then they will save $673.48 but will cost 8 more days. They are saving 300.34-200=100.34 by choosing option A per day but for 8 days they are losing 8*100.34=802
It means that they should choose second option.
Option E is correct
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