Question
An e-commerce company located in Columbia, Missouri is considering two ways to deliver customer orders. The first option is to ship the goods directly to
An e-commerce company located in Columbia, Missouri is considering two ways to deliver customer orders. The first option is to ship the goods directly to customers throughout the US using trucks. The second option is to ship the goods to a 3PL in Minneapolis, MN via rail and have them ship the goods to customers using the best mode of transportation. Given the data below for 500,000 units, please answer the following questions:
(a) what is the equivalence point of the two options in units?
(b) What is the total cost associated with the first option at a quantity of $200,000 units?
(c) what is the total cost associated with the second option at a quantity of $200,000 units?
(d) At which volumes should each option be used?
| Option 1 - ship directly from Columbia, MO to customers | Option 2 - ship from Columbia, MO to Minneapolis, MN by rail and then ship to customers using the best mode of transportation | |
| Cost of material handling in Columbia, MO | $40,000 | $0 |
| Cost of transportation via rail | $360,000 | $0 |
| Cost of transportation via truck | $0 | $250,000 |
| Cost of transportation via air | $0 | $ 50,000 |
| Order fulfillment fee charged by 3PL | $0 | $ 20,000 |
| Fixed Cost | $20,000 | $36,000 |
| a) equivalence point = 100,000 units b) total cost of option 1 at 200,000 units = $180,000 c) total cost of option 2 at 200,000 units = $164,000 d) At volumes less than 100,000 units, option 1 is the better option, whereas at volumes greater than 100,000 units, option 2 is the better option. | ||
| a) equivalence point = 150,000 units b) total cost of option 1 at 200,000 units = $72,000 c) total cost of option 2 at 200,000 units = $90,000 d) At volumes less than 150,000 units, option 1 is the better option, whereas at volumes greater than 150,000 units, option 2 is the better option.
| ||
| a) equivalence point = 200,000 units b) total cost of option 1 at 200,000 units = $150,000 c) total cost of option 2 at 200,000 units = $220,000 d) At volumes less than 200,000 units, option 2 is the better option, whereas at volumes greater than 200,000 units, option 1 is the better option.
| ||
| a) equivalence point = 300,000 units b) total cost of option 1 at 200,000 units = $450,000 c) total cost of option 2 at 200,000 units = $550,000 d) At volumes less than 300,000 units, option 2 is the better option, whereas at volumes greater than 300,000 units, option 1 is the better option. |
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Audit Quality And Financial Statements Fraud Detection
Authors: Asma Al-znaimat, Mohammad Al- Dahiyat
1st Edition
3659537888, 978-3659537882
