Started in Madison, Wisconsin, after the student unrest of the 1960s had died down, the Let There Be Light Lamp Shade Company served an upscale local...

Started in Madison, Wisconsin, after the student

unrest of the 1960s had died down, the Let There

Be Light Lamp Shade Company served an

upscale local market for many years. It designed

and built custom lamp shades and lamp globes. In

the mid-1980s, some architects who had once

studied under Frank Lloyd Wright in nearby

Spring Green were commissioned to design sev-

eral large public buildings in Asia. A total of 5,400

identical lights were to be installed, and the Let"

There Be Light Lamp Shade Company wished to

bid on the work. Terms of sale would include

delivery to the foreign port where the buyer

would take possession.

Transportation costs would be a hurdle. In

the initial design, the shades were cylinders that

were 11 inches high and 11 inches in diameter

and were packed into boxes that were 12 by 12

by 12 inches. (We refer to these shades as style

A.) The pac~~$es cost 60 cents each and

weighed 1 pound each. The shades cost $4 each

to manufacture. They weighed 9 pounds each

and 10 pounds packaged.

They would be shipped to the Port of

Oakland. The land rate to Oakland was $1,000

per 40-foot container, without regard to weight,

although the weight of the load could not

exceed 44,000 pounds per loaded container

because of highway weight restrictions. The

in terior dimensions of the intermodal con-

tainer were 8 feet wide by 8.5 feet high by

40 feet long.

Ocean rates from Oakland to the overseas

port were $22 per ton (2,000 pounds), except

that the ocean conference used a measurement

ton that indicated that for bulky loads every

40 cubic feet would equal 1 ton for rate-making

purposes. (That is, a shipment weighing, say, 130

pounds and occupying 80 cubic feet would cost

as though it weighed 4,000 pounds.) Insurance

costs were 2 percent of the value of the shipment

ready to be loaded aboard ship in Oakland.

(This is calculated as all of the company's costs

up to this point.)

Because of the large size of the order, Let

There Be Light Lamp Shade Company realized

that it could custom design a shade that, rather

than being a cylinder, would be shaped like a

cone. The advantage to that was that the shades

could be nested. Some padding would be

required between the shades, but the nested

shades would also help protect each other.

However, cutting out material for conical

shapes results in waste, so production costs

would be higher. Two alternative cone-shaped

designs were proposed (referred to as styles B

and C).

Style B cost $5 per shade to manufacture

and could be shipped nested in packages of six.

The package dimensions were 12 by 12 by 48

inches, and when holding six shades, a package

weighed 62 pounds. Each package cost $2, and

this included padding between the shades.

Style C cost $6 per shade to make and

could be shipped nested in packages of 10. The

package dimensions were 12 by 12 by 50 inches,

and when holding 10 shades, a package

weighed 101 pounds. Each package cost $3,

including padding between the individual

shades.

QUESTIONS

-

1.    How many style A shades can be loaded into an

intermodal container?

2.    How many style B shades can be loaded into an

interrnodal container?

3.    How many style C shades can be loaded into an

interrnodal container?

4.    What are the total costs of delivering the style A

shades to the port of importation?

5.    What are the total costs of delivering the style B

shades to the port of importation?

6.    What are the total costs of delivering the style C

shades to the port of importation?

7.    Which style would you recommend? Why?