Question

a manager must make a decision on shipping. there are two shippers: a and b. both offer a two-day rate: a for $512, and b for $521. in addition, a offers a three-day rate of $462 and a nine-day rate of $407, and b offers a four-day rate of $453 and a seven-day rate of $422. annual holding costs are 36 percent of unit price. three hundred and ninety boxes are to be shipped, and each box has a price of $144. which shipping alternative would you recommend? (round your intermediate calculations to 3 decimal places and final answers to 2 decimal places.)

Answer 1

To determine the recommended shipping alternative, we calculate the total cost of each option. After comparing the total costs, Shipping Alternative A is recommended due to its lower total cost.

Step-by-step explanation:

To determine which shipping alternative to recommend, we need to consider the total cost of each option. Let's calculate the total cost for each shipping alternative:

Shipping Alternative A:

Two-day rate: $512 x 390 boxes = $199,680

Three-day rate: $462 x 390 boxes = $180,180

Nine-day rate: $407 x 390 boxes = $158,730

Shipping Alternative B:

Two-day rate: $521 x 390 boxes = $203,190

Four-day rate: $453 x 390 boxes = $176,670

Seven-day rate: $422 x 390 boxes = $164,580

Next, we need to calculate the annual holding cost, which is 36% of the unit price ($144 x 390 boxes = $56,160) multiplied by 36% = $20,217.60.

Lastly, we add the shipping cost to the holding cost for each shipping alternative:

Total cost for Shipping Alternative A: $199,680 + $20,217.60 = $219,897.60

Total cost for Shipping Alternative B: $203,190 + $20,217.60 = $223,407.60

Based on the calculations, I would recommend Shipping Alternative A as it has a lower total cost compared to Shipping Alternative B.