Suppose that a product's value is $1000. The manufacturer experiences a holding cost of 2.5% per month. The firm ships the product across country by truck, and it arrives seven days later. The shipping cost is $80 per unit. What is the holding cost on each unit shipped? (Assume 30 days per month.)
A) $5.83
B) $5.00
C) $0.07
D) $0.40
E) $14.00

Question

Quizplus · Accepted Answer

The holding cost per month is 2.5% of $1000, which equals $25. For seven days, the holding cost is $ \frac{7}{30} \times $25 = $5.83 $.

Suppose That a Product's Value Is $1000