Holding costs - which option is more economical

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Reference no: EM1369734

Holding Costs

Your options for shipping #100,000 of machine parts from Baltimore to Kuala Lumpur, Malaysia are (1) use a ship that will take 30 days at a cost of $3,800, or (2) truck the parts to Los Angeles and then ship at a total cost of $4,800. The second option will take only 20 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year.

a. Which option is more economical?
b. What customer issues are not included in the data presented.

Reference no: EM1369734

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