LANDED COST PROBLEM

Amco 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 Amco'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, Amco could fill a container

with $400$ headboards and ship the remainder in a second container when needed. Amco

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. Amco uses about $100$ headboards per month.

Tariffs remain the same. Which option should Amco select based on landed cost?