Question: Richard's Sporting Goods needs to fill an online order for a gross (144) of hockey sticks. The manager is considering shipping the order by truck to the customer in Wisconsin, at a carrier charge of $75. The delivery will take five days and the order is paid on delivery (Richard's doesn't get paid until the sticks are received). The hockey sticks are valued at $50 for each stick and Richard's uses a 25 percent annual inventory carrying charge.
a. What will be the total shipping and transit inventory cost of the shipment?
b. If the shipment could be delivered in only 2 days at a cost of $100, should the manager do it? How much money would be saved or lost?