Question

A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $538 and B for $529 In addition, A offers a three-day rate of $472 and a nine-day rate of $406, and B offers a four-day rate of $455 and a seven-day rate of $428. Annual holding costs are 39 percent of unit price. Four hundred and ten boxes are to be shipped, and each box has a price of $156. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.) Option 2 days 4 days 7 days Cost Cost Option 2 days 3 days 9 days Ship two-day using B O Ship four-day using B Ship seven-day using B Ship two-day using A Ship three-day using A

Answer 1

The supplier should ship 2 days using B as it yields the lowest cost.

Units	410
Unit price	$             156.00
total cost of product to be shipped = (Unit price * Units) = 410*156	$       63,960.00
Holding cost = 39% ,39%*63960	$     24,944.400
Holding cost for 1 day = 24944.40/365	$             68.341
Shipper A
Alternative	Shippping cost	Holding days	Holding days * Holding cost for 1 day	Total cost = Shipping + holding cost
2-Day	$             538.00	2	$                        136.682	$                                                674.68
3 day	$             472.00	3	$                        205.022	$                                                677.02
9 day	$             406.00	9	$                        615.067	$                                            1,021.07
Shipper b
Alternative	Shippping cost	Holding days	Holding days * Holding cost for 1 day	Total cost = Shipping + holding cost
2-Day	$             529.00	2	$                        136.682	$                                                665.68
4 day	$             455.00	4	$                        273.363	$                                                728.36
7 Day	$             428.00	7	$                        478.386	$                                                906.39