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 $152. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.)

A			B
Option	Cost		Option	Cost
2 days	$		2 days	$
3 days	$		4 days	$
9 days	$		7 days	$

Answer 1

Annual Holding cost = 31% of unit price

Total boxes shipped = 330 boxes

Price of each box = $152

Hence, total annual holding cost for storing 330 boxes = 31% * 330 * 152 = $15549.6

Daily holding cost = 15549.6 / 365 = $42.602 per box

Shipper A:

Total cost for 2 days = 2 days rate + 2 day holding cost = 508 + 2 * 42.602 = $593.20

Total cost for 3 days = 3 days rate + 3 day holding cost = 474 + 3 * 42.602 = $601.81

Total cost for 9 days = 9 day rate + 9 day holding cost = 410 + 9 * 42.602 = $793.42

Shipper B:

Total cost for 2 days = 2 day rate + 2 day holding cost = 533 + 2 * 42.602 = $618.2‬0

Total cost for 4 days = 4 day rate + 4 day holding cost = 451 + 4 * 42.602 = $621.41

Total cost for 7 days = 7 day rate + 7 day holding cost = 430 + 7 * 42.602 = $728.21

A	B
Option	Cost	Option	Cost
2 days	$	593.20	2 days	$	618.20
3 days	$	601.81	4 days	$	621.41
9 days	$	793.42	7 days	$	728.21

-----------------------------------------------------------------------------------------------------------------------

In case of any doubt, please ask through the comment section before Upvote/downvote.