Question

A firm has 3 customer orders, each for 12,000lbs of coal. It is $15.75 per 100 lbs to ship directly to each customer (including unloading), or $10.50 per 100 lbs for consolidated shipments with a $300 fee for each unloading stop. Should the firm consolidate shipments?

Answer 1

Yes, firm should consolidate shipment as it give saving of $990.

Step-by-step explanation:

Given: Three customer order 12000 lbs of coal each.

Cost of individual shipment is $15.75 per 100 lbs

Cost of consolidated shipment is $10.50 per 100 lbs with $300 fees.

Now, lets find out cost for all 3 customer in both the shipment.

Cost of individual shipment=
`(12000)/(100) * 15.75 = 120* 15.75`

= $1890

Next, cost for all three customer´shipment is
`1890* 3= \$ 5670`

∴ Cost of shipment for three customer through individual shipment is $5670

Cost of consolidated shipment:

`(12000)/(100) * 10.50= 120* 10.50 = \$ 1260`

Next, cost for all three customer with the $300 fee=
`3* ( 1260+300)= \$ 4680`

∴ Cost of shipment for three customer through consolidated shipments is $4680

Saving with consolidated shipment =
`5670-4680= \$ 990`

Now, we can say it is profitable for firm to consolidate shipment as it give saving of $990.