Question

A firm has 3 customer orders, each for 12,000lbs of coal. It is $15.75 per 100 lbs to ship directly to each customer (including unloading), or $10.50 per 100 lbs for consolidated shipments with a $300 fee for each unloading stop. Should the firm consolidate shipments?

Answer 1

Answer:

Yes, firm should consolidate shipment as it give saving of $990.

Explanation:

Given: Three customer order 12000 lbs of coal each.

           Cost of individual shipment is $15.75 per 100 lbs

           Cost of consolidated shipment is $10.50 per 100 lbs with $300 fees.

Now, lets find out cost for all 3 customer in both the shipment.

Cost of individual shipment= $\frac{12000}{100} \times 15.75 = 120\times 15.75$

= $1890

Next, cost for all three customer´shipment is $1890\times 3= \ 5670$

∴ Cost of shipment for three customer through individual shipment is $5670

Cost of consolidated shipment:

$\frac{12000}{100} \times 10.50= 120\times 10.50 = \ 1260$

Next, cost for all three customer with the $300 fee= $3\times ( 1260+300)= \ 4680$

∴ Cost of shipment for three customer through consolidated shipments is $4680

Saving with consolidated shipment = $5670-4680= \ 990$

Now, we can say it is profitable for firm to consolidate shipment as it give saving of $990.