A shipment of parts valued at $75,000 needs to be shipped from San Francisco, CA, to Bismark, ND. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?

A shipment of parts valued at $75,000 needs to be shipped from San Francisco, CA, to Bismark, ND. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $300,000, has a four-year life, and requires $101,000 in pretax annual operating costs. System B costs $380,000, has a six-year life, and requires $95,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 10 percent. Calculate the EAC for both conveyor belt systems. System A 156,921.11 System B 147,417.49 %24 %24
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $340,000, has a 4-year life, and requires $133,000 in pretax annual operating costs. System B costs $420,000, has a 6-year life, and requires $127,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 25 percent and the discount rate is 10 percent. Calculate the EAC for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System B Which conveyor belt system should the firm choose? System B System A
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Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $320,000, has a four-year life, and requires $117,000 in pretax annual operating costs. System B costs $400,000, has a six-year life, and requires $111,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 21 percent and the discount rate is 10 percent. Calculate the EAC for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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Calculate how much more expensive using the slower method would be than using the faster method. The per-year holding cost is $500. The faster method of shipping this item is three days faster than the slower one, but it is $2.50 more per unit. Using the slower method would be __________ more expensive overall than using the faster method
Mueller Corp. manufactures flash drives that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, and will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?
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