Holding Costs
Not what you're looking for?
Your options for shipping #100,000 of machine parts from Baltimore to Kuala Lumpur, Malaysia are (1) use a ship that will take 30 days at a cost of $3,800, or (2) truck the parts to Los Angeles and then ship at a total cost of $4,800. The second option will take only 20 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year.
a. Which option is more economical?
b. What customer issues are not included in the data presented.
Purchase this Solution
Solution Summary
The solution picks the better option based on holding costs.
Solution Preview
Option 1
30 days = holding cost of 20.5% of value of shipment
Plus $3,800 shipping
30 days wait for letter of credit.
Option 2
20 days = holding time of 13.6% of value of shipment
Plus $4,800 shipping
20 days wait for letter of credit
Summary
20.5 ...
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking