A manager at Strateline Manufacturing must choose between two shipping alternati

Question

A manager at Strateline Manufacturing must choose between two shipping alternatives: two-day freight and five-day freight. Using five-day freight would cost $138 less than using two-day freight. The primary consideration is holding cost, which is $10 per unit a year. 2,280 items are to be shipped.

Which alternative would you recommend? (Round your intermediate calculations to 2 decimal places.)

which of the two given is correct ?

A manager at Strateline Manufacturing must choose between two shipping alternatives: two-day freight and five-day freight. Using five-day freight would cost $138 less than using two-day freight. The primary consideration is holding cost, which is $10 per unit a year. 2,280 items are to be shipped.

Explanation / Answer

2 day freight

Incremental holding cost of 5 day freight is $821.92 which is more than the savings.
Incremental holding cost = 10,000*$10*(3/365) = $821.92

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