The traffic manager of a monarch Elactric Company has just received a rate of reduction offer from trucking company. The proposal ia a rate of $3 per
hundredvweight (cwt). if a minimum of 40000 pounds is moved in each shipment. currently shipments of 20000 pounds or more are moved at rate of $5 per cwt. if
shipment fall below 20000 pounds a rate of $9 per cwt applies.

to help traffic manager make decision:

annual demand on warehouse 5000 motor per year

warehouse replenishment orders 43 orders per year

weigh of each motor crated 175lb per motor

standard cost of motor in ware house $200 per motor

stock replenishment $15

ineventory carrying costs as a percentage of avearge value

of inventory on hand per year 25 % per year

handling cost .30 per cwt

warehouse space unlimited

Should the company implement the new rate?