A carrier takes three weeks to deliver a product which has average sales of 1,000 units per week. The unit cost is $20 each and the carrying cost is 15%. What is the savings in the transportation inventory cost if management decides to change the mode of transportation to decrease time to one week?
The average sales per week are 1,000 units. With a lead time of 3 weeks, the transportation inventory is 3,000 units (1,000 units/week * 3 weeks). The cost of carrying the inventory is calculated as: 3,000 units * $20/unit * 15% = $9,000. If the lead time is reduced to 1 week, the transportation inventory becomes 1,000 units (1,000 units/week * 1 week). The new carrying cost is calculated as: 1,000 units * $20/unit * 15% = $3,000. The savings in transportation inventory cost by reducing the lead time from 3 weeks to 1 week is therefore $9,000 - $3,000 = $6,000.
I think 6000. 3 weeks lead time so 3 days inventory =3*1000*20*.15 = 9000 now Better transportation so 1 week lead time so 1 days inventory =1*1000*20*.15=3000 So savings are 9000-3000=6000
$20x1000×15%= 3000 2 weeks lead time Is 3000x2 = $6000 Ans C
$20x2000×15%= 3000 2 weeks lead time is 3000x2
what is the formula for this answer? I think correct answer is A