Question

Determine which shipping alternative would be most economical to ship 125 boxes of parts when each box has a price of $200 and holding costs are 30 percent of price, given this shipping information: overnight, $300, two-day, $260, six-day, $180. (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer: Two-day option at $301.10

Explanation:

Total cost = Cost of Shipment + (H * shipment time)/365

H = Annual earning potential = 125 units * (200 * 30%)

= $7,500

Overnight shipping:

= 300 + 7,500 * 1/365

= $320.55

Two-day

= 260 + 7,500 * 2/365

= $301.10

Six-day

= 180 + 7,500 * 6/365

= $303.29

The Two-day option would be most economical.