Question

A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $504 and B for $526. In addition, A offers a three-day rate of $472 and a nine-day rate of $410, and B offers a four-day rate of $452 and a seven-day rate of $428. Annual holding costs are 30 percent of unit price. Three hundred and sixty boxes are to be shipped, and each box has a price of $150. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.)

A B
Option Cost Option Cost
2 days $ 2 days $
3 days $ 4 days $
9 days $ 7 days $
a. Ship two-day using A
b. Ship three-day using A
c. Ship two-day using B
d. Ship four-day using B
e. Ship seven-day using B

Answer 1

a. Ship two-day using A

Step-by-step explanation:

The cost = FC +dH

where;

FC = cost of the ship; &

`dH = 0.30 * (360 \ boxes) * ( $150) * ((no. \ of \ shipping \ days)/(365))`

To find, the cost for 2 days,3 days & 9 days rate, we have:

`Cost = 504 + \Big [ 0.30 * (360 ) * (150) * ((2)/(365)) \Big ]`

Cost = $504 + 88.77

Cost = $592.77

`Cost = 526 + \Big [ 0.30 * (360 ) * (150) * ((2)/(365)) \Big ]`

Cost = $526 + 88.77

Cost = $614.77

`Cost = 472 + \Big [ 0.30 * (360 ) * (150) * ((3)/(365)) \Big ]`

Cost =$472 + 133.15

Cost = $605.15

Also, the cost for 3-days & 9-day rates are calculated and values are tabulated as shown below.

Option Cost Option Cost

2 days $592.77 2 days $614.77

3 days $605.15 4 days $629.53

9 days $809.45 7 days $738.68

From above, it is recommended and advisable to opt for ship two-day using A.