The Wagner Company supplies electric motors to Electronic Distributors, Inc. on a deliveredprice basis. Wagner has the

The Wagner Company supplies electric motors to Electronic Distributors, Inc. on a delivered‐price basis. Wagner has the responsibility for providing transportation. The logistics manager has three transportation service choices for delivery – Rail, piggyback, and truck. He has complied the following information:

Electronic Distributors purchases 50,000 units per year at a delivered contract price of $500 per unit. Inventory‐carrying cost is 25% of the unit inventory value per year. Wagner manages two stocking points, one within its plant and one close to the headquarters of Electronic Distributors. Assume that the average inventory levels at both locations are always half of the shipment size.
a) What is the annual inventory‐holding cost at the plant under each transport mode? Please include the formula, at least one-step of calculation and the correct answer in each transport situation for full credit.
b) What is the annual inventory‐holding cost at the warehouse that is close to the headquarters of Electronic Distributors under each transport mode? For full credit, please include the formula, at least one-step of calculation, and the correct answer in each transport situation.
c) What is the in‐transit inventory‐holding cost under each transport mode? For full credit, please include the formula at least one-step of calculation, and the correct answer in each transport situation.
d) Wagner wishes to select the transport mode that will minimize the total cost. Based on this criterion, which transport mode do you recommend Wagner to use? Please provide the total costs of each transport mode for full credit. That is, the recommendation should be made based on the comparison of the total costs of the three transportation modes.

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Transit Time (days)| Rate.S/Unit Shipment Size (Units) Rail Piggyback Truck 14 10 10.000 7,000 5.000