A manufacturer in Nebraska ships finished products to the ocean port in San Diego, California. New loading facilities will be needed to accommodate the expected growth in sales for their new product. In 2018, the company shipped 3.5 million pounds of product through several areas in San Diego. The logistic Costs in 2018 are given in the table. Due to growth in emerging markets, the company expects a growth rate of 8% per year through this port for the next five years.Rail Truck Transportation Variable Cost $ 170,000 $ 310,000 Inventory CostsCarrying 40,000 25,000 handling 15,000 40,000 Ordering 5,000 15,000 Fixed Cost 160,000 90,000 Total Cost $ 390,000 $ 480,000
A manufacturer in Nebraska ships finished products to the ocean port in San Diego, California. New loading facilities will be needed to accommodate the expected growth in sales for their new product. In 2018, the company shipped 3.5 million pounds of product through several areas in San Diego. The logistic Costs in 2018 are given in the table. Due to growth in emerging markets, the company expects a growth rate of 8% per year through this port for the next five years.Rail Truck Transportation Variable Cost $ 170,000 $ 310,000 Inventory CostsCarrying 40,000 25,000 handling 15,000 40,000 Ordering 5,000 15,000 Fixed Cost 160,000 90,000 Total Cost $ 390,000 $ 480,000
A. What is the variable cost of each transportation method (Rail and Truck)?
B. What is the cost to ship 4 million pounds of products for each transportation method? (Note: Round the variable cost per pound to 4 decimal places)
C. At what level of demand per year would these two transportation methods be equal in terms of total costs? (Round the answer to 2 decimal places) (Note: Round the variable cost per pound to 4 decimal places)
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