A Shipment of Parts Valued at $705,000 Needs to Be

question 21

Essay

A shipment of parts valued at $705,000 needs to be shipped from Montreal, QC to Edmonton, AB. They could be shipped by rail, taking 17 days at a cost of $1,500, or by truck, taking 4 days at a cost of $6,200. The annual holding cost rate for this type of item has been estimated at 30%. What option is more economical?

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Definitions:

Indirect Manufacturing Costs

Costs associated with manufacturing that are not directly related to the physical production of goods, such as maintenance, supervision, and utilities.

Cost Object

Anything for which cost is measured and assigned, such as a product, service, project, or customer.

Indirect Cost

Expenses not directly attributable to a specific product or activity, often including overhead costs like utilities.

Contribution Format

A type of income statement where costs are divided into variable and fixed categories, emphasizing the contribution margin.