APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 130

Which of the following conditions when met, economically justifies the addition of new warehouse facilities?

Answer options

• A. Cost of warehousing and local delivery is greater than cost of direct shipment to the customers
• B. Cost of warehousing and local delivery is less than cost of direct shipment to the customers
• C. Cost of warehousing is greater than cost of local delivery
• D. Cost of warehousing is less than cost of local delivery

Correct answer: A

Explanation

The correct answer is A because if the combined costs of warehousing and local delivery are higher than the cost of direct shipment, it suggests that new warehouse facilities could be more cost-effective. Options B, C, and D do not provide a scenario that justifies the need for additional warehouse facilities.