Question

In: Economics

JRT Motors Inc. has been shipping its Suzuki engines in containers to avoid the necessary crating...

JRT Motors Inc. has been shipping its Suzuki engines in containers to avoid the necessary crating of the engines. JRT Motors Inc. will pay freight on container load of 40 tons, regardless of whether or not the container is completely filled with engines. Record shows that due to engine size, JRT Motors Inc. has shipped only 30 tons per container. Freight of container cost $3.00 per kilograms.

If the engines are crated so that they can be shipped at the rate of $3.50 per hundred kilograms with the freight bill computed only on the actual weight shipped. The cost of crating would be $50 per engine and would increase the shipping weight from 1500 kg to 1520 kg per engine. How much more economical shipping the engine in crates than in containers? Should JRT Motors Inc. ship the engines in crates or in containers?

Please show a clear, complete and step-by-step solutions as well as essential formulas to be considered.

Solutions

Expert Solution

JRT motors could pay freight of 40 tonnes regardless of whether or not the container is filled with engines.

Due to engine size, JRT motors has shipped only 30 tonnes per container. Freight of container cost is $3 per kilogram. 30 tonnes is equal to 30,000 kilograms. So, the total cost would be 30,000*3 = $90,000. However, as it's said JRT motors will pay the bill for 40 tonnes, so the cost will be 40 tonnes = 40,000 kilograms, 40,000*3. =$1,20,000.

If the engines have to be crated then the fare has to be paid only on the actual weight shipped. The freight for crating is $3.50 per hundred kilograms. The cost of crating is $50 per engine and the engine weight would increase from 1500 to 1520 kilograms per engine. So, the cost of crating would be $50*1500 = $75,000. The shipping weight increases to 1520 kilogrms after creating. The cost is $3.50 per hundred kilograms. If $3.50 is the cost per hundred kilograms, then the cost per thousand kilograms would be 10*3.50 = $35. The total cost would be, 1520kgs = 1000kgs + 520 kgs= 1000*35+520*3.5 { whereas, 35 = cost per thousand kilograms, and 3.5 is the cost per hundred kilograms} = 35,000+1820 =$36,820. So, the total cost if the things are being created would be = $36820+75,000 = $1,11,820.

Shipping it by containers gives a total cost of $1,20,000, whereas, in crates gives a total cost of $1,11,820. So, JRT motors should ship by crating as it gives a lower cost.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

A shipping freighter has space for two more shipping containers, but the combined weight cannot go...
A shipping freighter has space for two more shipping containers, but the combined weight cannot go over 20 tons. Four shipping containers are being considered. The following table provides details on the weight (in tons) and value of the contents of each container. ​ Container 1 2 3 4 Weight of container (tons) 5 6 9 7 Value / Container $6,000 $5,500 $7,500 $6,000 ​ Develop a binary integer model ( write all the constraints) that will determine the two...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors.
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:Per Unit15,400 UnitsPer YearDirect materials$9$138,600Direct labor11169,400Variable...
Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one...
Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronic component, which is purchased from two local suppliers: Hydra International and Parable Company. Both suppliers are reliable and rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the same component for $10.00. Fame purchases 80% of its components from Parable because of the lower price it offers. The total annual demand is 95,000 units. I. Activity Data Activity...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: 1 Sales (33,000 units) $8,250,000.00 2 Production costs (40,500 units): 3 Direct materials $3,240,000.00 4 Direct labor 1,822,500.00 5 Variable factory overhead 1,012,500.00 6 Fixed factory overhead 607,500.00 6,682,500.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,160,000.00 9 Fixed selling and administrative expenses...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (44,000 units): 3 Direct materials $4,400,000.00 4 Direct labor 1,760,000.00 5 Variable factory overhead 1,100,000.00 6 Fixed factory overhead 660,000.00 7,920,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,170,000.00 9 Fixed selling and administrative expenses...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (44,000 units): 3 Direct materials $4,400,000.00 4 Direct labor 1,760,000.00 5 Variable factory overhead 1,100,000.00 6 Fixed factory overhead 660,000.00 7,920,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,170,000.00 9 Fixed selling and administrative expenses...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and...
Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (46,500 units): 3 Direct materials $4,650,000.00 4 Direct labor 1,860,000.00 5 Variable factory overhead 1,162,500.00 6 Fixed factory overhead 697,500.00 8,370,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,250,000.00 9 Fixed selling and administrative expenses...
Income statements under absorption and variable costing Shawnee Motors Inc. assembles and sells snowmobile engines. The...
Income statements under absorption and variable costing Shawnee Motors Inc. assembles and sells snowmobile engines. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (3,000 units) $570,000 Production costs (4,000 units): Direct materials $281,200 Direct labor 134,800 Variable factory overhead 67,600 Fixed factory overhead 44,800 528,400 Selling and administrative expenses: Variable selling and administrative expenses $81,900 Fixed selling and administrative expenses 31,700 113,600...
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016,...
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (44,500 units): 3 Direct materials $3,560,000.00 4 Direct labor 2,002,500.00 5 Variable factory overhead 1,112,500.00 6 Fixed factory overhead 667,500.00 7,342,500.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,130,000.00 9 Fixed selling and administrative...
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016,...
Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July: 1 Sales (35,000 units) $8,750,000.00 2 Production costs (42,500 units): 3 Direct materials $4,250,000.00 4 Direct labor 2,125,000.00 5 Variable factory overhead 1,062,500.00 6 Fixed factory overhead 637,500.00 8,075,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,150,000.00 9 Fixed selling and administrative...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT