Problem 15-3 A manager must make a decision on shipping. There are two shippers,
ID: 339799 • Letter: P
Question
Problem 15-3 A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $536 and B for $525. In addition, A offers a three-day rate of $464 and a nine-day rate of $416, and B offers a four-day rate of $459 and a seven-day rate of $436. Annual holding costs are 37 percent of unit price. Three hundred and ninety 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.) Option 2 days 3 days 9 days Option 2 days 4 days 7 days Cost Cost 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
Units
390
Unit Price $
154
Total Ship $
60,060
Total Holding Cost per shipment $
(37% of 154)*390= 22,222.2
Increamental cost of 1 day= 22,222.2/365= 60.88 per day
Shipper A
Alternatives
Shipping Cost
Incremental Days
Incremental Cost $
Total Cost
2-day
536
3-day
464
9-day
416
Shipper B
Alternatives.
Shipping Cost
Incremental Days
Incremental Cost $
Total Cost
2-day
525
525$
4-day
459
7-day
524.88 $ is the lowest price coming for ship 3-day using A hence first option is correct
Units
390
Unit Price $
154
Total Ship $
60,060
Total Holding Cost per shipment $
(37% of 154)*390= 22,222.2