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Break-Even Product Value of Using Express Mail Versus Parcel

Calculate the break-even product value of using Express Mail (overnight delivery) versus Parcel Post (three-day delivery) for sending a package from Peoria, Illinois to Memphis, Tennessee. The following table contains the appropriate costs. Assume that inventory carrying cost is 25 percent per year of the product value and that there are 365 days in a year.

weight (lbs) cost (OND) cost (3 day)
2 $15.00 $2.87
3 17.25 3.34
4 19.4 3.78
5 21.55 4.1
6 25.4 4.39
7 26.45 4.67
8 27.6 4.91
9 28.65 5.16

Solution Preview

As I understand the question, the product is considered to be in the inventory, until it is actually delivered to the customer.

This means that the difference of 2 days in delivery of the product by two mailing options ...

$2.19