Your company needs to ship two large machines that cost about $75,000 each to a customer across the country.The machines will be shipped by rail at a cost of $2,000.Shipping will take 14 days.Your company uses 15 percent to determine the annual inventory carrying cost.What are the approximate total costs of shipping and in-transit inventory? (Use 365 days as the number of days in a year.)
A)$2,000.
B)$863.
C)$2,863.
D)$2,026.

Question

Quizplus · Accepted Answer

The total costs include the shipping cost and the in-transit inventory carrying cost. Shipping cost is $2,000. The in-transit inventory carrying cost is calculated as follows: [(2 machines * $75,000 each) * 15% annual carrying cost] * (14 days / 365 days) = $863.01 approximately. Adding the shipping cost and the in-transit inventory carrying cost gives $2,000 + $863 = $2,863.

Your Company Needs to Ship Two Large Machines That Cost