Question

A manager must make a decision on shipping. There are two shippers: A and B. Both offer a two-day rate: A for $508, and B for $533. In addition, A offers a three-day rate of $474 and a nine-day rate of $410, and B offers a four-day rate of $451 and a seven-day rate of $430. Annual holding costs are 31 percent of unit price. Three hundred and thirty boxes are to be shipped, and each box has a price of $152. Which shipping alternative would you recommend

Answer 1

Answer:

The answer is "Option A (2 days)".

Explanation:

Using formula:

The daily cost for storing the product = $\frac{(\text{Annual Holding cost} \times \text{Product value})}{365}$  

                                                              $= \frac{(0.31 \times 152)}{365} \\\\= \frac{(47.12)}{365} \\\\= 0.129$

The daily cost of storing $330 \ boxes = 330\times 0.129 = \ 42.601$

For point A:

For (2 days):

$= 508 + (2\times 42.6) = 593.203$

 For (3 days):

$= 474 + (3\times 42.6) =601.805$

For (9 days):

$= 410 + (9\times 42.6)= 793.415$

For point B:

 For (2 days):

$= 533 +(2\times 42.6) = 618.203$

 For (4 days):

$= 451 +(4\times 42.6) = 621.407$

For (7 days):

$= 430 +(7\times 42.6) = 728.212$