Microtech Incorporated has decided to package its cell phone in a smaller, recyc
ID: 336033 • Letter: M
Question
Microtech Incorporated has decided to package its cell phone in a smaller, recyclable package. Additionally, the company will discontinue the practice of shipping each phone with a 250-page user manual and instead will make the manual available online. These changes will result in a lighter, but more difficult package for shippers to handle. The weight of each packaged phone has dropped from 1.4 pounds to 0.5 pounds as a result of these changes and the freight classification has worsened from 65 to 77.5. Use the table below to calculate the difference in Microtech's monthly shipping charges if the company ships 10,000 phones per month. Matrix of Weight Breaks and Freight Class (S/cwt) ClassExplanation / Answer
a)
Before the changes in packaging, total monthly shipping weight = 10000 phones * 1.4 lb per phone = 14,000 lbs
The applicable rate for class 65 and weight break 10000 lbs is 14.17
Shipping costs are = $ 14.17*14000/100 = $ 1,983.80
b) After the changes in packaging, total monthly shipping weight = 10000 phones * 0.5 lb per phone = 5000 lbs
The applicable rate for class 77.5 and weight break 5000 lbs is 22.19
Shipping costs are = $ 22.19*5000/100 = $ 1,109.50
c) Thus, the new packaging will save shipping costs by $ 874.30 (=1983.80-1109.50) per month.