Question

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?

Answer 1

Answer:

Alternative of shipping boxes through shipper A by three-day rate offer is most economical option. Cost of shipping is $603.31, which lowest of all costs.

Explanation:

Given Q = 330 boxes

Unit price, p = $154

Holding cost = H = 30% of p = 0.3*154 = $46.2 per box per annum

Total holding cost = HC = Q*H*(d/365)

Total Shipping Cost = R + HC

Calculation of shipping cost of various alternatives are attached in the following images.

Alternative of shipping boxes through shipper A by three-day rate offer is most economical option. Cost of shipping is $603.31, which lowest of all costs.