Use the following to answer the questions below.
The Steele Bike Company assembles bicycles for a major retail toy outlet.The main purchase is bicycle frames for making these bicycles.Dan Steele,the owner,wants to locate a low-cost supplier for the frames used in this assembly operation.The supplier will be selected based on total annual cost to supply Steele's needs.Annual requirements are for 100,000 frames,and the company operates 200 days a year.Two suppliers,Acme and State,have quoted the same price for the frames,but quantities,lead times and shipping costs are considerably different.The following data are available for the two suppliers.

-Refer to the instruction above.What are the annual shipping savings available when comparing the two suppliers?
A)$25,000
B)$10,000
C)$7,500
D)Shipping costs are the same from either supplier

Question

Use the following to answer the questions below.
The Steele Bike Company assembles bicycles for a major retail toy outlet.The main purchase is bicycle frames for making these bicycles.Dan Steele,the owner,wants to locate a low-cost supplier for the frames used in this assembly operation.The supplier will be selected based on total annual cost to supply Steele's needs.Annual requirements are for 100,000 frames,and the company operates 200 days a year.Two suppliers,Acme and State,have quoted the same price for the frames,but quantities,lead times and shipping costs are considerably different.The following data are available for the two suppliers.
 
-Refer to the instruction above.What are the annual shipping savings available when comparing the two suppliers?
A)$25,000 
B)$10,000 
C)$7,500 
D)Shipping costs are the same from either supplier

Quizplus · Accepted Answer

Comparing the two suppliers, Acme has an annual shipping cost of $12,000 ($60 per shipment x 200 shipments) while State has an annual shipping cost of $37,500 ($75 per shipment x 500 shipments). The difference in annual shipping costs between the two suppliers is $25,000 ($37,500 - $12,000). Therefore, choosing Acme over State will result in an annual shipping savings of $25,000.

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