Be sure to show the calculations that helped in your decision-making.


A manager at Strateline Manufacturing must chose between two shopping Alternatives; Two-day freight and five-day. Using five-day freight would cost $135 less than using two-day freight. The primary consideration is holding cost, which is $10 per unit a year. 2000 items are to be shipped. Which alternative would you recommend? Explain.

(10/365)(3)(2000) = ?

I'm sure you can take it from here.

$10*2000=$20000*(3/365)

=$164

To determine which alternative to recommend, we need to consider the cost of using each shipping option as well as the holding cost for the items.

Let's break down the calculations:

1. Cost of two-day freight:
Since the cost of using five-day freight is $135 less than using two-day freight, we can calculate the cost of two-day freight as follows:
Cost of two-day freight = Cost of five-day freight + $135

2. Cost of five-day freight:
To calculate the cost of five-day freight, we need to consider the holding cost for the items since they will be in transit for a longer time.
Cost of five-day freight = (Number of items) * (Holding cost per unit per year) * (Number of years)

Now, let's substitute the given values into the equations:
Number of items = 2000
Holding cost per unit per year = $10
Number of years = We are not given the time period, so let's assume it is one year for simplicity.

Plugging in the values:
Cost of five-day freight = 2000 * $10 * 1 = $20,000

Now we can substitute the cost of five-day freight into the first equation:
Cost of two-day freight = $20,000 + $135 = $20,135

Comparing the costs:
Two-day freight costs $20,135, while five-day freight costs $20,000. The difference between the costs is ($20,135 - $20,000) = $135.

Based on the calculations, the cost of using five-day freight is $135 less than using two-day freight. Therefore, I would recommend choosing the five-day freight alternative since it will save $135 in shipping costs.