3. Mary is materials and distribution manager for ACME Enterprises. She is responsible for all transportation,...

 

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3. Mary is materials and distribution manager for ACME Enterprises. She is responsible for all transportation, distribution, materials and purchasing for this multi-national firm The company has just embarked upon a new venture in Australia. It will involve moving pharmaceuticals from Oakland, California to Melbourne, Australia. Her two choices are water, which would take 15 days door to door, and air, which takes 5 days door to door. A letter of credit arrangement, or sight draft system, will be used so that ACME will be paid for the goods when they arrive at the receiver's Distribution Center in Melbourne. The relevant costs in Mary's decision are as follows: Freight by water is $2,225 with delivery to the dock in Oakland costing $450 and at Melbourne the dock to plant delivery is $365. The air move would be $5,950. Delivery to the airport in Oakland is $425 and delivery from the airport in Melbourne is $400 Documentation using the water mode would be about $200 whereas the air move would cost $300. Insurance by water would cost $600 per move; with air it would be $475. Packing and carting to protect the cargo on the water transport would be about $625 per shipment; with air it would involve a secure air container total cost of $540 The company cost of capital is 9 percent. The value of the goods is $250,000 per shipment. If Mary uses the total cost of ownership (all costs considered) principle, which mode should she recommend and WHY (10 points)? Table 1: In-transit Costs Freight Pickup (Oakland) Delivery (Melbourne) Documentation Insurance Packing/carting Time in transit cost (TITC) (see below) Total Water Air 3. Mary is materials and distribution manager for ACME Enterprises. She is responsible for all transportation, distribution, materials and purchasing for this multi-national firm The company has just embarked upon a new venture in Australia. It will involve moving pharmaceuticals from Oakland, California to Melbourne, Australia. Her two choices are water, which would take 15 days door to door, and air, which takes 5 days door to door. A letter of credit arrangement, or sight draft system, will be used so that ACME will be paid for the goods when they arrive at the receiver's Distribution Center in Melbourne. The relevant costs in Mary's decision are as follows: Freight by water is $2,225 with delivery to the dock in Oakland costing $450 and at Melbourne the dock to plant delivery is $365. The air move would be $5,950. Delivery to the airport in Oakland is $425 and delivery from the airport in Melbourne is $400 Documentation using the water mode would be about $200 whereas the air move would cost $300. Insurance by water would cost $600 per move; with air it would be $475. Packing and carting to protect the cargo on the water transport would be about $625 per shipment; with air it would involve a secure air container total cost of $540 The company cost of capital is 9 percent. The value of the goods is $250,000 per shipment. If Mary uses the total cost of ownership (all costs considered) principle, which mode should she recommend and WHY (10 points)? Table 1: In-transit Costs Freight Pickup (Oakland) Delivery (Melbourne) Documentation Insurance Packing/carting Time in transit cost (TITC) (see below) Total Water Air