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Unit 2 Total Cost Analysis For Shipment Rate

The traffic manager of Monarch Electric Company received an offer from a trucking company to ship fractional horsepower motors to their field warehouse at a rate of $3 per hundredweight if a minimum of 20,000 pounds is shipped, or $4 per hundredweight for shipments of 15,000 pounds or more. Currently shipments under 15,000 pounds are $5 per hundredweight. Additional information provided includes an annual demand of 6,000 motors, replenishment orders of 13 times per year, motor weight of 5 pounds each, and various costs. The traffic manager needs to determine whether to accept the new shipping rate.

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176 views1 page

Unit 2 Total Cost Analysis For Shipment Rate

The traffic manager of Monarch Electric Company received an offer from a trucking company to ship fractional horsepower motors to their field warehouse at a rate of $3 per hundredweight if a minimum of 20,000 pounds is shipped, or $4 per hundredweight for shipments of 15,000 pounds or more. Currently shipments under 15,000 pounds are $5 per hundredweight. Additional information provided includes an annual demand of 6,000 motors, replenishment orders of 13 times per year, motor weight of 5 pounds each, and various costs. The traffic manager needs to determine whether to accept the new shipping rate.

Uploaded by

gabriela_cornejo_1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Universidad Internacional Del Ecuador

Logistics and International Distribution


UNIT 2: TOTAL COST ANALYSIS TO DETERINE S!I"ENT RATE
The traffic manager of the Monarch Electric Company has just received a
rate reduction offer from a trucking company for the shipment of
fractional horsepower motors to the company's field warehouse. The
proposal is a rate of $3 per hundredweight cwt! if a minimum of "#$###
pounds is moved in each shipment. Currently$ shipments of %#$### pounds
or more are moved at a rate of $& per cwt. 'f the shipment si(e falls
)elow %#$### pounds$ a rate of $* per cwt. applies.
To help the traffic manager make a decision$ the following additional
information has )een gathered+
,nnual demand on warehouse &$### motors per year
-arehouse replenishment orders "3 orders per year
-eight of each motor$ crated ./& l). per motor
0tandard cost of motor in warehouse $%## per motor
0tock replenishment order1handling costs $.& per order
'nventory carrying costs as a %&2 per year
percentage of average value of
inventory on hand for a year
3andling cost at warehouse $#.3# per cwt.
-arehouse space 4nlimited
0hould the company put the new rate to use5

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