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

Exercise 11

A company can ship LTL direct to customers in city A or use a public warehouse located in city B. It has determined the following data.
Cost per cwt. for shipping LTL to city A is $0.70 + $0.30 per mile.
Cost per cwt. for shipping TL to warehouse is $0.40 + $0.15 per mile.
Warehouse handling costs are $0.30 per cwt.
Distances: Plant to city A = 115 miles
Plant to city B = 135 miles
From city B to city A = 30 miles
a. What is the total cost per cwt. to ship from the plant direct to customers in city A?
b. What is the total cost per cwt. to ship via the warehouse in city B?
c. In this problem, the cost per cwt. has a fixed and a variable component. Why?