Your options for shipping

$99 comma 790

of machine parts from Hamilton to Kuala Lumpur, Malaysia, are (1) use a ship that will take

29

days at a cost of

$3 comma 880

,

or (2) truck the parts to Vancouver and then ship at a total cost of

$4 comma 820

.

The second option will take only

22

days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at

30

%

of the value per year.

a)

Alternative 1

Alternative 2

is more economical, with a daily holding cost of

$nothing

.

(Enter your response rounded to two decimal places.)

b) What issues are not included in the data presented?

A.

For each additional day it takes to deliver the parts, you forgo the interest you could have earned on the payment.

B.

For each additional day it takes to deliver the parts, customer satisfaction is likely to decrease.

C.

For each additional day it takes to deliver the parts, total fuel costs for shipping increase.