Question

​Monczka-Trent Shipping is the logistics vendor for Handfield Manufacturing Co. in Ohio. Handfield has daily shipments of a​ power-steering pump from its Ohio plant to an auto assembly line in Alabama. The value of the standard shipment is ​$271 comma 590. ​Monczka-Trent has two​ options: (1) its standard 2​-day shipment or​ (2) a subcontractor who will team drive overnight with an effective delivery of 1 day. The extra driver costs ​$180. ​Hadfield's holding cost is 35​% annually for this kind of inventory. ​a) ▼ is more​ economical, with a daily cost of ​$ nothing. ​(Enter your response as a whole​ number.)

Answer 1

Answer:

$260 per day

Explanation:

Handfield Manufacturing Co.

Holding cost = 35% annually = 0.35

Standard Cost = $271,590

Number of Days in a Year = 365 days

Hence;

Daily Holding Cost = (Standard Cost x Holding Cost) / Number of Days in a Year

Daily Holding Cost = ($271,590 x 0.35) / 365

Daily Holding Cost = $260 per day

Extra Driver Cost = $180

Hence the benefit of subcontractor who will team with an effective delivery of 1 day can be calculated as follows;

Daily Holding Cost - Extra Driver Cost

= $260 - $180

= $80

Therefore, the use of subcontracting the team who will drive overnight is more economical, with a daily cost of $260 per day.