Industrial distributor that source from hundreds of supplier

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Reference no: EM132213000

Flanger is an industrial distributor that sources from hundreds of suppliers. Flanger uses a third party transportation company to ship its products. The two modes of transportation available for inbound shipping are LTL (less than truckload) and TL (truckload). LTL shipping costs $1 per unit, whereas TL shipping costs $600 per truck. Each truck can carry up to 1,000 units. Flanger wants to decide the shipping mode (TL or LTL) based on annual demand of the products. The material cost per unit is $50 and Flanger uses a holding cost of 20%. Flanger incurs a fixed cost of $90 for each order placed with a supplier.

a) If the annual demand is 7,000 units, which transportation mode should Flanger use?

b) If the annual demand is 3,000 units, which transportation mode should Flanger use?

Reference no: EM132213000

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