Bill's glass store needs to ship an order of 10 chandeliers to a builder about 1,000 miles away.The chandeliers cost about $10,000 each,and Bill will be paid upon delivery.Bill plans to ship the order by truck at a cost of $1,000.The delivery will take 10 days.Bill uses a 30 percent annual inventory carrying cost.What will be the approximate total shipping and transit inventory carrying cost of the shipment? Assume 365 days per year.

Question

Quizplus · Accepted Answer

The shipping cost is $1,000.

To calculate the inventory carrying cost, we need to first find the value of the inventory. The value of the 10 chandeliers is:

10 chandeliers x $10,000 per chandelier = $100,000

The inventory carrying cost for the 10 days of transit is:

($100,000 x 30%)/365 x 10 = $821.92

The annual inventory carrying cost would be:

($100,000 x 30%)/365 x 365 = $30,000

So the approximate total shipping and transit inventory carrying cost of the shipment is:

$1,000 + $821.92 + $30,000 = $31,821.92

Therefore, the best choice is D.

Bill's Glass Store Needs to Ship an Order of 10