Problem 15-3 41 A manager must make a decision on shipping. There are two shippe
ID: 325589 • Letter: P
Question
Problem 15-3 41 A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $522 and B for $532 In addition, A offers a three-day rate of $478 and a nine-day rate of $410, and B offers a four-day rate of $456 and a seven-day rate of $424. Annual holding costs are 30 percent of unit price. Three hundred and thirty boxes are to be shipped, and each box has a price of $154. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.) 2.86/20 points awarded Scored Cost S522.00 519-77 Option 2 days Option Cost s 532.00 2 days 3 days 9 days702.39 4 days 539.54 O 7 days632.85 " Ship three-day using A Ship two-day using B Ship four-day using B Ship seven-day using B Ship two-day using AExplanation / Answer
Total value of330 boxes = $154 / Box x 330 boxes = $50820
Annual holding cost ( @ 30 percent ) =0.30 x50820 =$15246( 1 year = 365 days)
Daily holding cost for 330 boxes = $15246 / 365 = $41.77
Total cost of any shipping option
= Freight + Holding cost
= Freight ( for 330 boxes ) + Daily holding cost for 330 boxes ( i.e $41.77) x Number of days of shipment
Below table presents Total cost of all shipping options as per formula written above
Shipping option
SHIPPER A
SHIPPER B
Holding cost($)
Total cost ($)
Freight ($)
Holding cost($)
Total cost ($)
2 day rate
3 day rate
4 day rate
7 day rate
9 day rate
As it is evident from above, the LEAST “Total cost” is $603.31for 3 day rate offered by Shipper Aand hence this shipping alternative should be recommended
SHIPPING ALTERNATIVE OF 3 DAY RATE OFFERED BY SHIPPER A IS RECOMMENDED
Shipping option
SHIPPER A
SHIPPER B
Freight ( $ )Holding cost($)
Total cost ($)
Freight ($)
Holding cost($)
Total cost ($)
2 day rate
522 83.54 605.54 532 83.54 615.543 day rate
478 125.31 603.314 day rate
456 167.08 623.087 day rate
424 292.39 716.399 day rate
410 375.93 785.93