Problem 11-6 Suppose Jones Company has orders from three customers located in th
ID: 349285 • Letter: P
Question
Problem 11-6 Suppose Jones Company has orders from three customers located in the same market area. One order has a total weight of 4,200 pounds, the second weighs 8,900 pounds, and the third weighs 12,700 pounds. The transportation carrier quotes a freight rate of $20 per hundredweight (or cwt.) for direct shipment to the customer for shipments weighing 1,000 to 4,999 pounds $18 per cwt. for orders weighing 5,000 to 9,999 pounds, and $16 for shipments weighing between 10,000 and 15,000 pounds. Alternatively, the carrier's rate for shipments weighing more than 20,000 pounds is $12.00 per owt. However, if the orders are combined into one consolidated shipment, the carrier will charge $320 for each stop it is required to make. a. Calculate the total cost wilth or without consolidated shipment charge. Total cost using separate shipments Total cost using consolidated shipment b. Should Jones consolidate the three shipments? Yes NoExplanation / Answer
a.
Total cost using separate shipments:
First order weighs 4200 pounds
Corresponding freight rate is $20 per cwt (1 cwt = 112 pounds)
Thus, first order cost = (4200 / 112) X 20 = 750$ ------------------- (1)
Second order weighs 8900 pounds
Corresponding freight rate is $18 per cwt (1 cwt = 112 pounds)
Thus, second order cost = (8900 / 112) X 18 = 1430.35$ ------------------- (2)
Third order weighs 12700 pounds
Corresponding freight rate is $16 per cwt (1 cwt = 112 pounds)
Thus, third order cost = (12700 / 112) X 16 = $ 1814.3 ------------------- (3)
Thus, total cost using separate shipments = (1) + (2) + (3)
= 3995$
Total cost using consolidated shipment
Consolidated weight = 4200 + 8900 + 12700 = 25800 pounds
Freight rate is 12$ per cwt
Thus, freight charges for consolidate shipment = (25800 / 112) X 12 = 2764.3 $
Additional costs for making 3 stops = 320 X 3 = 960$
Therefore, total cost for consolidated shipment = 2764.3 + 960 = 3724.3$
b.
Since consolidated shipping saves Jones around 270 $, the answer is YES