Problems

1. Scholarly Books, Inc. has an order for two thousand copies of the latest Mary Weaver novel. The Company sells the books for $15.00 each. It estimates that it can earn 9.00% per year on its money. The books can be shipped today for delivery tomorrow at a cost of $75.00. Or for delivery the day after tomorrow at a cost of $70.00; or for delivery on the third day for $65.00; or for delivery on the fourth day for $50.00. Whenever the books are shipped, payment is expected to be received 5 business days after the buyer receives the novels.

1. What is the dollar amount that could be earned on this money per year? Per day?
2. Which shipping schedule should Scholarly Books use?

2. (One step beyond) Fencepost Computers, Inc. has an order for 50 laptop computers. The Company sells the computers for $500 each. It estimates that it can earn 8% per year on its money. The laptops can be shipped today for delivery tomorrow at a cost of $100.00; payment would be received in 5 calendar days after shipment. Or for delivery the day after tomorrow at a cost of $85.00; payment would be received in 7 calendar days. Or for delivery in 5 calendar days at a cost of $75.00; payment would be received in 14 calendar days.

1. What is the dollar amount that could be earned on this money per year? Per day?
2. How much could be saved by shipping for delivery the day after tomorrow? For delivery in 5 business days? For delivery in 7 business days?
3. How much does it cost Fencepost to wait 5 days for payment? 7 days? 14 days?
4. Which shipping schedule should Fencepost use?

Solutions

1. a. Earnings per year <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image292::/sites/dl/free/0072443901/24520/Image292.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image292 (1.0K)</a>Image292 .
Earnings per day <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image293::/sites/dl/free/0072443901/24520/Image293.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image293 (1.0K)</a>Image293 .

b. A one-day delay in shipping saves $5.00, but foregoes $7.40 in earnings. Ship for one-day delivery.

2. a. Earnings per year <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image294::/sites/dl/free/0072443901/24520/Image294.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image294 (1.0K)</a>Image294 .
Earnings per day <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image295::/sites/dl/free/0072443901/24520/Image295.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image295 (1.0K)</a>Image295 .

b. The day after tomorrow: $100.00 - $85.00 = $15.00 saved.
5 days: $100.00 - $75.00 = $25.00 saved.

c. To wait 5 days: <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image296::/sites/dl/free/0072443901/24520/Image296.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image296 (1.0K)</a>Image296 in foregone earnings.
To wait 7 days: <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image297::/sites/dl/free/0072443901/24520/Image297.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image297 (1.0K)</a>Image297 in foregone earnings.
To wait 14 days: <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image298::/sites/dl/free/0072443901/24520/Image298.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image298 (1.0K)</a>Image298 in foregone earnings.

d. The formula is: shipping savings ? earnings foregone = gain (loss).
Overnight shipment: $0 savings - $27.40 = -$27.40
Day after tomorrow shipment: $15.00 - $38.36 = -$23.36
Five day shipment: $25.00 - $76.72 = -$51.72

Use the day after tomorrow shipping schedule.