Use this template to show your numeric calculations. Without calculations shown for how you reached your conclusion, section V will earn 0 points. REMEMBER: Decisions like this are based on a comparison of option A versus current methods, or option B versus current methods.
- The products are primarily medium- and large-size insulated coolers, like you might use for a picnic or trip to the beach. Each cooler occupies 2 cubic feet of trailer truck space; trailers are 10 x 10 x 40' long and cost $1,000 to ship from the East Coast to the West Coast.
- The coolers are made of 3 components: 1 lb of raw material A, 1/4 lb of raw material B, and 1 gallon of material C, weighing 10 lbs. Based on this information, the added freight cost to get raw materials to a West Coast manufacturing location would be $0.20, $0.20, and $0.60 per finished-good unit, respectively.
- The mass merchandiser location on the West Coast will be purchasing 10,000 units per week, but in lots of only 1,000 at a time because of their retail store space constraints.
- The market is very competitive, with generally stable or decreasing marketplace prices.
- In states that are warm year-round, sales are pretty steady In states that have seasons, 90% of sales occur in the May-August period.
- The raw materials to make this product are bulky, and inbound shipping from the suppliers to the manufacturing plant represents 20% of total raw material costs. These raw materials are supplied in the United States from the East Coast; they are not available elsewhere.
- In the past, to keep West Coast customers happy, the CEO agreed to freight equalize customer shipping charges to be competitive with West Coast competition. She says that they only charge those customers the local freight cost of shipping, which is $200 per delivery for anything up to half-truckload quantities.
Attachment:- excel template.xlsx