Question

ABC Inc. ships its computer products to Buffalo, New York. In 2019, the company shipped 4 million pounds of product through several areas in Buffalo. The logistic Costs in 2019 are given in the table below. Due to growth in emerging markets, the company expects a growth rate of 8% per year through this port for the next five years. If the company's top priority is to maximize profit, which transportation type it should choose this year, based on the information given in the table? Rail Truck 300,000 245.000 70.000 Transportation Variable Cost Inventory Costs Carrying handling Ordering Fixed Cost Total Cost 35.000 25.000 267.000 697.000 68,000 43,000 27,000 180.000 563,000 Truck SOX Rand 5056 Truck Both types are equally important O None of the answers above is correct

Answer 1

Answer is Truck Only relevant cost should be compared Fixed cost is not relevant in deciding which mode of transport Rail Truck Transportation costs $300,000 $245,000 Inventory costs Carrying $70,000 $68,000 Handling $35,000 $43,000 Ordering $25,000 $27,000 Total relevant costs $430,000 $383,000