A manager at Strateline Manufacturing must choose between two shipping alternatives: two-day freight and five-day freight. Using five-day freight would cost $145 less than using two-day freight. The primary consideration is holding cost, which is $9 per unit a year. 2,125 items are to be shipped. Which alternative would you recommend

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Business

Kaufman

16 December, 01:10

A manager at Strateline Manufacturing must choose between two shipping alternatives: two-day freight and five-day freight. Using five-day freight would cost $145 less than using two-day freight. The primary consideration is holding cost, which is $9 per unit a year. 2,125 items are to be shipped. Which alternative would you recommend

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Answers (1)

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Keyon Lambert · Answer 1

2 days freight

Explanation:

The computation is shown below:

The compression is done by considering the holding cost

Holding cost = 2,125 items shipped * $9 per unit

= $19,125

Time Savings = 3 days

Now

Holding Cost for 3 days = $19,125 * (3 days : 365 days)

= 157.19

This is more than than the given amount i. e $145

Therefore, it is advisable to go for 2 days freight as it contains the less amount as compared to 5 days