Question

Suppose you have three shipments to make. One shipment has a weight of 3,800 pounds, the second weighs 8,500 pounds, and the third weighs 12,300 pounds. The transportation rates are: $16/cwt (1 cwt. = 100 pounds). for shipments of 1,000–5,000 pounds, $14/cwt. for 5,000–10,000 pounds, and $12/cwt. for shipments over 10,000 pounds. For consolidated shipments, there is a charge of $280 per stop.

a. Calculate the three individual shipments and consolidated shipments.

b. What will be the cost difference if you choose to consolidate the shipments rather than to ship each one individually?

Answer 1

a) Individually

3800 pounds	3800 x $16 / 100 pounds = $608
8500 pounds	8500 x $14 / 100 pounds = $1,190
12300 pounds	12300 x $12 / 100 pounds = $1,476
Total Cost	$3,274

Consolidated

Now, you will consolidate all the shipments into one shipment.

Total weight = 3800 pounds + 8500 pounds + 12300 pounds = 24600 pounds

Total cost = Cost of transportation + Cost of stops = [ 24600 pounds x $12 / 100 pounds ] + 3 x $280 = $3,792

b) If you consolidate, their will be extra cost = $3,792 - $3,274 = $518