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LOGISTICS REPORT: Shipping 5,000 units costs $22,500 (current carrier). VENDOR PROPOSAL: New carrier charges $3.80 per unit with $5,000 monthly minimum. OPERATIONS MEMO: "Monthly volume averages 4,800 units." Should the company switch carriers based on cost?

GMAT · 2022 · Data Insights
Question:
LOGISTICS REPORT: Shipping 5,000 units costs $22,500 (current carrier). VENDOR PROPOSAL: New carrier charges $3.80 per unit with $5,000 monthly minimum. OPERATIONS MEMO: "Monthly volume averages 4,800 units." Should the company switch carriers based on cost?

Options

(A) Yes, saves $1,240/month
(B) Yes, saves $3,360/month
(C) No, costs $740/month more
(D) No, costs $1,240/month more
(E) Break-even, no cost difference
Answer: (B) Yes, saves $3,360/month

Explanation:
Current cost for 4,800 units = (4,800/5,000) × $22,500 = $21,600. New carrier: 4,800 × $3.80 = $18,240, which exceeds $5,000 minimum. Savings = $21,600 - $18,240 = $3,360. None match; recalculating: If current is $22,500 for 5,000 units = $4.50/unit, then 4,800 × $4.50 = $21,600. New = $18,240. Savings = $3,360

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