Asked by Peter Manyang Bichok on May 02, 2024
Verified
A container of ball-bearings valued at $25,000, currently located in Winnipeg, MB needs to be delivered to the Ottawa, ON plant. The standard shipment method takes two days. However, for an additional charge of $500, the container can be sent overnight to arrive one day later. The annual holding cost rate for this type of item has been estimated at 28%. Which option is more economical?
Holding Cost
The expenses incurred for storing and maintaining unsold inventory, including storage, insurance, taxes, and opportunity costs.
Winnipeg
The capital and largest city of Manitoba, Canada, known for its cultural diversity and historical significance.
- Determine the most cost-effective shipping method by analyzing holding and transportation expenses.
Verified Answer
AA
Ahmad AlghafliMay 09, 2024
Final Answer :
Daily cost of holding the item is .28(25,000)/365 = $19.18. Since the extra shipping cost is $500, the $19.18 savings does not offset the extra shipping cost. Send the shipment using the standard method.
Learning Objectives
- Determine the most cost-effective shipping method by analyzing holding and transportation expenses.