Introduction to Materials Management 8th Edition by Steve Chapman ,Tony Arnold ,Ann Gatewood ,Lloyd Clive

Exercise 8

A company ships LTL to customers in a market in the Midwest at an average cost of $40 per cwt. It proposes establishing a distribution center in this market. TL shipment costs to the DC would be $20 per cwt., the estimated inventory carrying costs are $5 per cwt., and the local cartage (LTL) cost is estimated at $10 per cwt. If the annual shipped volume is 100,000 cwt., what will the annual savings be by establishing the distribution center?