Question

Naranja International, located in South Africa, offers oranges at a purchase price of $1.03 per pound. First, the oranges need to be shipped to the USA via waterway. The ocean freight costs are $3,500 per container and the import duties from South Africa are 3% of the value of shipped oranges. Once arriving at the port of Long Beach, California, drayage costs are $275 per container. You momentarily store the oranges at a local warehouse at a rate of $6.00 per pallet. The container is picked up the next day and travels intermodal (through a motor carrier) to your facility at a cost of $160 per container. Upon arrival at your facility, you've calculated costs of $6.00 per pallet for receiving and quality. Based on historical averages, 2% of your container of oranges will spoil and 3% will be wasted in transport. The administrative costs to successfully manage a relationship between your organization and Naranja International are estimated at 9% of the value of a container of shipped oranges. These costs account for the intricacies of dealing with an offshored supplier on a different continent, with a different language and culture than what is found at Smoothie City headquarters. Each case of oranges is 25 pounds, with 40 cases per pallet and 15 pallets per container.

Answer 1

The total cost per pound for the oranges from Naranja International, including all expenses, is approximately $1.3121.

Step-by-step explanation:

To calculate the total cost per pound for the oranges, we need to consider all the expenses incurred throughout the process. First, the purchase price is $1.03 per pound. Shipping costs involve ocean freight ($3,500 per container), import duties (3% of the value of shipped oranges), drayage costs ($275 per container), and intermodal travel ($160 per container). Additionally, there are storage costs ($6.00 per pallet) both at the local warehouse and upon arrival at your facility.

Calculating the total cost per container:

- Number of pounds per container = 25 pounds/case × 40 cases/pallet × 15 pallets/container = 15,000 pounds/container

- Purchase price per container = 15,000 pounds/container × $1.03/pound = $15,450

- Shipping costs = $3,500 (ocean freight) + 3% × $15,450 (import duties) + $275 (drayage) + $160 (intermodal travel) = $3,500 + $463.50 + $275 + $160 = $4,398.50

- Storage costs = $6.00/pallet × 15 pallets = $90 (at the local warehouse) + $6.00/pallet × 15 pallets = $90 (at your facility)

- Total container cost = Purchase price + Shipping costs + Storage costs = $15,450 + $4,398.50 + $90 + $90 = $19,028.50

To find the cost per pound:

Total cost per pound = Total container cost / Total pounds per container = $19,028.50 / 15,000 pounds = $1.2686 per pound

However, we need to account for spoilage and waste:

- 2% spoilage on 15,000 pounds = 0.02 × 15,000 = 300 pounds

- 3% waste in transport on 15,000 pounds = 0.03 × 15,000 = 450 pounds

Total loss = 300 pounds (spoiled) + 450 pounds (waste) = 750 pounds

Adjusted total pounds = 15,000 pounds - 750 pounds = 14,250 pounds

Adjusted cost per pound = Total container cost / Adjusted total pounds = $19,028.50 / 14,250 pounds = $1.3322 per pound

Finally, considering administrative costs (9% of the container's value):

Administrative costs = 9% × $19,028.50 = $1,712.565

Adjusted total cost = Total container cost + Administrative costs = $19,028.50 + $1,712.565 = $20,741.065

Adjusted total cost per pound = Adjusted total cost / Adjusted total pounds = $20,741.065 / 14,250 pounds = $1.3121 per pound