Question

A manager must make a decision on shipping. There are two shippers: A and B. Both offer a two-day rate: A for $508, and B for $533. In addition, A offers a three-day rate of $474 and a nine-day rate of $410, and B offers a four-day rate of $451 and a seven-day rate of $430. Annual holding costs are 31 percent of unit price. Three hundred and thirty boxes are to be shipped, and each box has a price of $152. Which shipping alternative would you recommend

Answer 1

The answer is "Option A (2 days)".

Step-by-step explanation:

Using formula:

The daily cost for storing the product =
`\frac{(\text{Annual Holding cost} * \text{Product value})}{365}`

`= ((0.31 * 152))/(365) \\\\= ((47.12))/(365) \\\\= 0.129`

The daily cost of storing
`330 \ boxes = 330* 0.129 = \$ 42.601`

For point A:

For (2 days):

`= 508 + (2* 42.6) = 593.203`

For (3 days):

`= 474 + (3* 42.6) =601.805`

For (9 days):

`= 410 + (9* 42.6)= 793.415`

For point B:

For (2 days):

`= 533 +(2* 42.6) = 618.203`

For (4 days):

`= 451 +(4* 42.6) = 621.407`

For (7 days):

`= 430 +(7* 42.6) = 728.212`