Small manufacturer of high-end folding travel bicycles

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Reference no: EM132264834

Bike Friday is a small manufacturer of high-end folding travel bicycles. The bikes can be folded and carried in a Travelcase. The controller of Bike Friday is looking into ways to cut costs. The company purchases the Travelcases in lot sizes of 100, at a unit price of $65 plus $4.50 for shipping expense. A lot would last a little more than one month. The purchase lead time is six to eight weeks. The controller has discovered that if the company ordered a full truckload of 500 Travelcases at a time, the unit price will be $50 plus $2.50 for shipping expense. However, Bike Friday would need a bigger storage space (350 square feet) which was not available in-house. Assuming that a nearby storage space could be leased for $400 a month, holding cost rate of 20 percent per unit per year, and ordering cost of $50 per order, determine if buying a truckload of Travelcases would have a lower total cost.

Reference no: EM132264834

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