The traffic manager of XYZ electric has just received a rate reduction offer from a trucking company for the shipment of fractional horse power motors to the company's field warehouse. The proposal is a rate of $3 per hundred weight (cwt) if a minimum of 40,000 pounds is moved in each shipment. Currently shipments of about 20,000 pounds or more are moved at a rate of $5 per cwt. If shipment size falls below 20,000 pounds, a rate of $ 9 per cwt applies. Should the company implement new rate To help the traffic manager make a decision the following additional information has been gathered. Operational descriptive Annual demand on warehouse Warehouse replenishment order size (current) Weight of each motor, crated Standard cost of motors in warehouse Stock replenishment order handling costs Inventory carrying costs as a percentage of average value of inventory on hand for a year Handling cost at warehouse Warehouse space Figures 5,000 motors per year 114 per order 175 pounds $200 per motor $15 per order 25 percent of the cost of motors $0.30 per cwt unlimited