Question

Problem $11.15 Question Help Your options for shipping $100.800 of machine parts from Baltimore to Kuala Lumpur, Malaysia, are (1) use a ship that will take 30 days at a cost of 2.640. truck the parts to Los Angeles and then ship at a total cost of $5,050. The second option will take only 22 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year. If you have a third option and it costs only 54 150 and also takes 22 days, what is your most economical plan? The daily holding cost of Alternative 1 is Enter your response rounded to two decimal places)

Answer 1

	Daily cost of holding the product = (Annual holding cost x Product value) / 365						All amounts in $
1	Daily Holding cost of Alternative 1 is)(30%*100800)/365):
	82.85
2	Daily cost of Alternative 1(3640+(30*82.85)):
	6125.5
3	Daily cost of Alternative 2(5050+(22*82.85)):
	6872.7
	By using the faster delivery option we can save 8 days
	Holding cost for 8 days(Daily Holding cost *8)			662.79
	Holding cost for 8 days is less than the cost savings( 5050-3640=1410) of using the faster shipping option
4	Daily cost of Alternative 3(4150+(22*82.85)):
	5972.7
	By using the faster delivery option we can save 8 days
	Holding cost for 8 days(Daily Holding cost *8)			662.79
	Holding cost for 8 days is greater than the cost savings( 4150-3640=510) of using the faster shipping option
	Theresfor Alternative 3 is the most economical