A manager must make a decision on shipping. There are two shippers: A and B. Both offer a two-day rate: A for $540, and B for $523. In addition, A offers a three-day rate of $474 and a nine-day rate of $403, and B offers a four-day rate of $451 and a seven-day rate of $422. Annual holding costs are 36 percent of unit price. Four hundred and twenty boxes are to be shipped, and each box has a price of $150. Which shipping alternative would you recommend

Ship 2days using B $647.27

Explanation:

Calculation to determine Which shipping alternative would you recommend

First step is to calculate the holding cost

Holding cost = .36 (420 boxes) ($150 per box) (1/365 days)

Holding cost= $62.137

Now let determine Which shipping alternative would you recommend using this formula

Cost = Fixex Cosy + Daily holding cost

Let plug in the morning

Shippers A

Option Cost

2 days$664.27

[$540+2days ($62.137)]

3 days$660.41

[$474+3days ($62.137)]

9 days$962.23

$403+9days ($62.137)

Shippers B

Option Cost

2 days$647.27

[$523+2days ($62.137)]

4 days$699.55

[$451+4days ($62.137)]

7 days$856.96

$422+7days ($62.137)

Based on the above calculation the shipping alternative that I would recommend is Ship 2 days using B with the amount of $647.27 because it is the cheapest of all.