Which option should psco select based on landed cost

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Reference no: EM132305989

Psco is considering ordering 500 headboards for the beds they make in their furniture line. They have located one supplier in China and the cost for the headboards is $25 each. The headboards could be shipped via ocean container and rail from the supplier’s location to Psco’s plant in North Carolina in lots of 100. The entire cost for the con-tainer is $5200 and the headboards represent one quarter of the shipment by cube. The tariffs applicable to the shipment are 2%. Alternatively, Psco could fill a container with 400 headboards and ship the remainder in a second container when needed. Psco receives a 5% discount from the supplier for orders over 300 units. The filled container would still cost $5200. The cost of holding the headboards in inventory is 2% of the cost of the inventory at the end of each month. Psco uses about 100 headboards per month. Tariffs remain the same. Which option should Psco select based on landed cost?

Reference no: EM132305989

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