Z Corp. can make three individual deliveries to three different customers at a cost of $500 each or can consolidate them into one shipment with a cost of $1,300 and a stop-off charge of $100 per stop. Should Z Corp consolidate?

A. Yes, it will save $100.

B. Yes, it is simpler to do.

C. No, it will increase cost by $100.

D. It doesn't matter based on cost.

Decision: reject the option to deliver the products together as it costs more by $100.

Explanation:

Z corp.

Option A (Deliver to each customer)

Total Delivery cost = $500 x 3 = $1,500

Option B (Deliver together to all 3 customers)

Total Delivery cost = $1,300 x 1 + ($100 x 3) = $1,600

Compare A & B = $1,500 minus $1,600 = - $100

Decision: reject the option to deliver the products together as it costs more by $100.

C. No, it will increase cost by $100.

Explanation:

Z Corp. can make three individual deliveries to three different customers at a cost of $500 each

Given that:

Cost of shipment = $1300

Cost of each delivery = $500

Stop of charge = $100 per stop

Total cost if for individual delivery to three different customers = 3 ($500) = $1500

Since they are three different customers, the total stop charge = 3 ($100)

cost for consolidating them into one shipment = $1300 + 3 ($100) = $1300 + $300 = $1600

Therefore there is an increase in cost of $1600 - $1500 = $100