A Shipment of Parts Valued at $75,000 Needs to Be

question 38

Essay

A shipment of parts valued at $75,000 needs to be shipped from Halifax, to Moncton. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, usually derived from profits.

Management Fees

Charges levied by management for the operation of an investment fund, company, or another entity, usually calculated as a percentage of assets under management.

Consolidated Retained Earnings

The portion of net earnings not paid out as dividends, but retained by the company to reinvest in its core business, or to pay debt, reported in the consolidated financial statements.

Subsidiary's Adjusted Income

The net income of a subsidiary company after making adjustments for fair value measurements, currency translation, and other accounting policies.