Suppose you have three shipments to make. One shipment has a weight of 4,500 pou

Question

Suppose you have three shipments to make. One shipment has a weight of 4,500 pounds, the second weighs 9,200 pounds, and the third weighs 13,000 pounds. The transportation rates are: $25/cwt (1 cwt. = 100 pounds). for shipments of 1,000–5,000 pounds, $23/cwt. for 5,000–10,000 pounds, and $21/cwt. for shipments over 10,000 pounds. For consolidated shipments, there is a charge of $350 per stop. a. Calculate the three individual shipments and consolidated shipments. b. What will be the cost difference if you choose to consolidate the shipments rather than to ship each one individually?

Explanation / Answer

a)

Individual shipments

Cost of shipment weighing 4500 pounds = 25*4500/100 = $ 1125

Cost of shipment weighing 9200 pounds = 23*9200/100 = $ 2116

Cost of shipment weighing 13000 pounds = 21*13000/100 = $ 2730

Total cost = 1125+2116+2730

= $ 5971

Consolidated shipments

Weight of consolidated shipment = 4500+9200+13000

= $ 5607

b) Cost difference by consolidating the shipments = 5971 - 5607

= $ 364 cost savings

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