**Transcription:**A company manufactures component parts for machine tools in North America and ships them to Southeast Asia for assembly and sale in the local market. The components are shipped by sea, transit time averages 6 weeks, and the shipping costs $2700 per shipment. The company is considering moving the parts by air at an estimated cost of $7500; the shipment taking 2 days to get there. If inventory in transit for the shipment costs $125 per day, should they ship by air?**Explanation:**This text introduces a logistical decision for a company shipping component parts internationally. It compares two options:1. **Sea Freight:** - **Cost:** $2700 per shipment - **Transit Time:** 6 weeks - **Inventory Cost:** Not explicitly stated for the sea option, but it implies longer inventory holding due to longer transit times.2. **Air Freight:** - **Cost:** $7500 per shipment - **Transit Time:** 2 days - **Inventory Cost:** $125 per day in transitThe company needs to evaluate whether the faster yet costlier air freight is more economical considering the inventory costs saved by reducing transit time.Understanding such trade-offs is crucial in supply chain management, highlighting the balance between cost and time efficiency in logistics.

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Answered: 13.2 A company manufactures component…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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