Packaging and material handling of single product

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Reference no: EM132244518

A company is exploring 2 options for packaging and material handling of a single product. This product has a standing yearly order from a customer of 100,000 units. Therefore, each year, the company will produce, package and load 100,000 units onto delivery trucks.

Option A

Under option A, the item can be packaged with 10 to a box. This box costs $5 (including all packaging materials). The material handling of this product will result in 2% of items being damaged and in need of replacement. It costs $3 to replace an item (this includes ALL costs to replace).

Option B

Under option B, the item can be packaged with 20 to a box. This box costs $7 (including all packaging materials). The material handling of this product will result in 3.5% of items being damaged and in need of replacement. It costs $3 to replace an item (this includes ALL costs to replace).

Which option provides the lowest cost for the company?

Option A

Option B

Reference no: EM132244518

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