A local microbrewery is looking to choose a delivery method to ship 500 cases of
ID: 432559 • Letter: A
Question
A local microbrewery is looking to choose a delivery method to ship 500 cases of beer to another province (value per case is $35). There are two competing carriers, FedY and FedZ, with options (delivery speeds) and freight costs below. The annual holding cost during transport is 30% of the value of each case. Determine which carrier and which delivery time option to recommend. (Assume 365 days / year.)
FedY Fedz Speed / days Base Freight Cost /S Speed / days Base Freight Cost /S 525 475 445 515 485 435 4 7Explanation / Answer
Total value of 500 cases of beer =$35 x 500 = $17500
Total annual holding cost of 500 cases of beer = 30% of $17500 = $5250
Daily holding cost of 500 cases of Beer = $5250 / 365 = $14.38
Total cost =Base freight + Total holding cost = Base freight +Daily holding cost x Number of days of shipment
Shipment option : FED Y :
2 days shipment =$525 + $14.38 x 2 = $525 + $28.76 = $553.76
4 days shipment = $475 + $14.38 x 4 = $475 + $57.52 =$532.52
6 days shipment = $445 + $14.38 x 6 = $445 + $86.28 = $531.28
Shipment option : Fed Z :
2 days shipment = $515 + $14.38 x 2 = $515 + $28.76 = $543.76
3 days shipment = $485 + $14.38 x 3 = $485+ $43,14 =$528.14
7 days shipment = $435 + $14.38 x 7 = $435 + $100.66 = $535.66
The least cost option out of above is $528.14which is for Carrier Fed Z with 3 days shipment option
CARRIER FED Z WITH 3 DAYS DELIVERY TIME OPTION IS TO BE RECOMMENDED
CARRIER FED Z WITH 3 DAYS DELIVERY TIME OPTION IS TO BE RECOMMENDED
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