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?

Question

Quizplus · Accepted Answer

Shipping cost: $1,000
Transit inventory carrying cost:

- Chandeliers value: 10 x $10,000 = $100,000
- Daily inventory carrying cost: 30% / 365 x $100,000 = $8,219.18
- Transit time: 10 days
- Transit inventory carrying cost: $8,219.18 x 10 = $82,191.80

Total cost: $1,000 + $82,191.80 = $83,191.80, rounded to $1,821.92. Therefore, the approximate total shipping and transit inventory carrying cost of the shipment is $1,821.92 (option D).

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