The traffic manager of the Monarch Electric Company has just received a 

rate reduction offer from a trucking company for the shipment of 

fractional horsepower motors to the company's field warehouse. The 

proposal is a rate of $3 per hundredweight (cwt) if a minimum of 40,000 

pounds is moved in each shipment. Currently, shipments of 20,000 pounds 

or more are moved at a rate of $5 per cwt. If the shipment size falls 

below 20,000 pounds, a rate of $9 per cwt. applies.

To help the traffic manager make a decision, the following additional 

information has been gathered:

Annual demand on warehouse 5,000 motors per year

Warehouse replenishment orders 43 orders per year

Weight of each motor, crated 175 lb. per motor

Standard cost of motor in warehouse $200 per motor

Stock replenishment order-handling costs $15 per order

Inventory carrying costs as a 25% per year

percentage of average value of

inventory on hand for a year 

Handling cost at warehouse $0.30 per cwt.

Warehouse space Unlimited