You are shipping 200 diamonds to one customer located 2,000 miles away.The value of a diamond is $1,500.You can ship via air for $500 and the diamonds will arrive in two days,or you can ship via a specialty ground carrier for $250 and the diamonds will arrive in four days.You figure your inventory carrying cost is 25 percent.Your customer will immediately transfer funds to your bank account on receipt of the shipment.Using the air carrier would save approximately how much money in total cost? Use 365 days as the number of days in a year.
A)Nothing,it would actually cost more.
B)$150.00
C)$247.95
D)$160.96

Question

Quizplus · Accepted Answer

First, let's calculate the inventory carrying cost for 2 days and 4 days respectively:
- 2 days: (200 diamonds x $1,500/diamond x 25%) x (2/365) = $205.48
- 4 days: (200 diamonds x $1,500/diamond x 25%) x (4/365) = $410.96

Now, let's calculate the total cost for each shipping option:
- Air: $500 + $205.48 = $705.48
- Ground: $250 + $410.96 = $660.96

The difference between the two options is:
$705.48 - $660.96 = $44.52

Therefore, using the air carrier would save approximately $44.52 in total cost. However, this assumes that the customer will immediately transfer funds upon receipt of the shipment. If there is any delay in payment, the inventory carrying cost will increase and could make the ground shipping option more cost-effective in the long run.

You Are Shipping 200 Diamonds to One Customer Located 2,000