Question

A given inventory item has a per-year holding cost of $500. One method of shipping this item is three days faster than the other, but it is $2.50 more per unit. Using the slower method would be __________ more expensive overall than using the faster method.

Answer 1

Answer: $1.61

Explanation:

From the question, we are informed that a given inventory item has a per-year holding cost of $500 and that one method of shipping this item is three days faster than the other, but it is $2.50 more per unit.

Using the slower method would be 1.61 more expensive overall than using the faster method. To do this, the holding cost has to be multiplied by speed differential. From the result gotten, we will now divide by 365 since 365 days make a year.

After the figure had been gotten, we will ow compare it to the actual difference of the shipping cost.