You manage the shipping of item #A452 from your supplier. The shipments for this item are delivered to the nearest port, and you have to transport them to the distribution center. You have two options, truck load (TL) and less than truck load (LTL). Your company needs 5000 units of #A452 per year and it is purchased at a price of $40 per unit. Each order costs $92. Your company uses a holding charge h=0.14, a cycle service level of 90% and 365 days per year for planning purposes. The truck load (TL) option costs $1300 per load. It takes 4 days to deliver and each truck can carry up to 1300 items. The less than truck (LTL) load option costs $2.7 per item. It takes 6 days to deliver. You have three options, OPTION A: to use the TL option and deliver full truck loads, OPTION B: to use the TL option and deliver the economic order quantity OPTION C: to use LTL option and deliver the economic order quantity. For all following parts, consider transportation costs as an item cost unless otherwise specified. i.e., the total variable cost of #A452 in the Full truckload is $1300/1300items + $40/item= $41/item.

You manage the shipping of item #A452 from your supplier. The shipments for this item are delivered to the nearest port, and you have to transport them to the distribution center. You have two options, truck load (TL) and less than truck load (LTL). Your company needs 5000 units of #A452 per year and it is purchased at a price of $40 per unit. Each order costs $92. Your company uses a holding charge h=0.14, a cycle service level of 90% and 365 days per year for planning purposes. The truck load (TL) option costs $1300 per load. It takes 4 days to deliver and each truck can carry up to 1300 items. The less than truck (LTL) load option costs $2.7 per item. It takes 6 days to deliver. You have three options, OPTION A: to use the TL option and deliver full truck loads, OPTION B: to use the TL option and deliver the economic order quantity OPTION C: to use LTL option and deliver the economic order quantity. For all following parts, consider transportation costs as an item cost unless otherwise specified. i.e., the total variable cost of #A452 in the Full truckload is $1300/1300items + $40/item= $41/item.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 21E: This year, Hassell Company will ship 4,000,000 pounds of chocolates to customers with total...

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