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The traffic manager of a monarch Elactric Company has just received a rate of reduction offer from trucking company. The proposal ia a rate of $3 per hundredvweight (cwt). if a minimum of 40000 pounds is moved in each shipment. currently shipments of 20000 pounds or more are moved at rate of $5 per cwt. if shipment fall below 20000 pounds a rate of $9 per cwt applies. to help traffic manager make decision:
annual demand on warehouse 5000 motor per year
warehouse replenishment orders 43 orders per year
weigh of each motor crated 175lb per motor
standard cost of motor in ware house $200 per motor
stock replenishment $15
ineventory carrying costs as a percentage of avearge value of inventory on hand per year 25 % per year
handling cost .30 per cwt
warehouse space unlimited
Should the company implement the new rate?
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