Asked by sauli Lianga on May 05, 2024
Verified
A shipment of parts valued at $75,000 needs to be shipped from Thunder Bay, ON to Edmonton, AB. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?
Holding Cost
The cost to keep or carry inventory in stock.
Thunder Bay
A city in Ontario, Canada, known for its strategic location as a transportation hub and for its historical significance in trade.
Edmonton
The capital city of the province of Alberta, Canada, known for its cultural events and historical sites.
- Calculate the economical shipping option based on holding cost and shipping cost.
Verified Answer
AA
Ayesha AbbasiMay 07, 2024
Final Answer :
Daily cost of holding the item is .22(75,000)/365 = $45.21
Days saved by using truck is 15 - 4 = 11 days
11 days × $45.21 = $497.31
Extra shipping cost = $2,640 - $1,575 = $1,065
The $497.27 savings does not offset the extra shipping cost of $1,065. Send the shipment by rail.
Days saved by using truck is 15 - 4 = 11 days
11 days × $45.21 = $497.31
Extra shipping cost = $2,640 - $1,575 = $1,065
The $497.27 savings does not offset the extra shipping cost of $1,065. Send the shipment by rail.
Learning Objectives
- Calculate the economical shipping option based on holding cost and shipping cost.