CHAPTER 5

Case Questions

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
0
$500,000
2,000,000
0
$420,000
2,000,000
1
$375,000
2,000,000
0
$375,000
2,000,000
0
$400,000
10,000,000
2000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
2000000

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

2007
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
1,425,000

Northwest
0
0
320,000
0
0
320,000
320,000

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$1,108,125.00
$710,125.00
$505,000.00
$1,068,750.00

TOTAL COST

$1,254,500.00

Southwest
0
0
200,000
0
0
200,000
200,000

Upper Midwest Lower Midwest

0
0
0
0
160,000
220,000
0
0
0
0
160,000
220,000
160,000
220,000

Northeast
0
0
350,000
0
0
350,000
350,000

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$0
$0.00
$0.00
$0
$0.00
$0.00
$220,000 $285,000.00
$505,000.00
$0
$0.00
$0.00
$0
$0.00
$0.00
$505,000.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
20,000,000
0

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
175,000
0
0
175,000
175,000

1,425,000
Total Supply
0
0
1,425,000
0
0

2,000,000
-

Holding Cost
$0.00
$0.00
$710,125.00
$0.00
$0.00
$710,125.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
1
$500,000
2,000,000
0
$420,000
2,000,000
1
$375,000
2,000,000
0
$375,000
2,000,000
0
$400,000
10,000,000
4000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
4000000

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

2008
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
2,565,000

Northwest
576,000
0
0
0
0
576,000
576,000

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$1,688,625.00
$1,373,225.00
$1,033,000.00
$1,923,750.00

TOTAL COST

$2,171,100.00

Southwest
360,000
0
0
0
0
360,000
360,000

Upper Midwest Lower Midwest

0
0
0
0
288,000
396,000
0
0
0
0
288,000
396,000
288,000
396,000

Northeast
0
0
630,000
0
0
630,000
630,000

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$300,000 $187,200.00
$487,200.00
$0
$0.00
$0.00
$220,000 $325,800.00
$545,800.00
$0
$0.00
$0.00
$0
$0.00
$0.00
$1,033,000.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
20,000,000
0

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
315,000
0
0
315,000
315,000

2,565,000
Total Supply
936,000
0
1,629,000
0
0

2,000,000
2,000,000
-

Holding Cost
$629,440.00
$0.00
$743,785.00
$0.00
$0.00
$1,373,225.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
1
$500,000
2,000,000
0
$420,000
2,000,000
1
$375,000
2,000,000
1
$375,000
2,000,000
0
$400,000
10,000,000
6000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
6,000,000
1,383,000
GAP

2009
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
4,617,000

Northwest
1,036,800
0
0
0
0
1,036,800
1,036,800

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$2,897,775.00
$2,186,805.00
$1,663,400.00
$3,462,750.00

TOTAL COST

$3,285,230.00

Southwest
648,000
0
0
0
0
648,000
648,000

Upper Midwest Lower Midwest

0
0
0
0
518,400
497,096
0
215,704
0
0
518,400
712,800
518,400
712,800

Northeast
0
0
984,504
149,496
0
1,134,000
1,134,000

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost
Variable Cost
Total Cost
$300,000 $336,960.00
$636,960.00
$0
$0.00
$0.00
$220,000 $400,000.00
$620,000.00
$220,000 $186,440.00
$406,440.00
$0
$0.00
$0.00
$1,663,400.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
20,000,000
0

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
0
567,000
0
567,000
567,000

4,617,000
Total Supply
1,684,800
0
2,000,000
932,200
0

2,000,000
2,000,000
2,000,000
-

Holding Cost
$752,992.00
$0.00
$805,000.00
$628,813.00
$0.00
$2,186,805.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
1
$500,000
2,000,000
1
$420,000
2,000,000
1
$375,000
2,000,000
1
$375,000
2,000,000
1
$400,000
10,000,000
10000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
10,000,000
1,689,400 GAP

2010
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
8,310,600

Northwest
1,866,240
0
0
0
0
1,866,240
1,866,240

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$4,965,995.00
$3,746,249.00
$2,892,120.00
$6,232,950.00

TOTAL COST

$5,371,414.00

Southwest
116,640
1,049,760
0
0
0
1,166,400
1,166,400

Upper Midwest Lower Midwest

0
0
933,120
0
0
1,283,040
0
0
0
0
933,120
1,283,040
933,120
1,283,040

Northeast
0
0
41,200
0
2,000,000
2,041,200
2,041,200

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$300,000 $396,576.00
$696,576.00
$250,000 $396,576.00
$646,576.00
$220,000 $264,848.00
$484,848.00
$220,000 $204,120.00
$424,120.00
$240,000 $400,000.00
$640,000.00
$2,892,120.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
4,000,000
0
20,000,000
-

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
0
1,020,600
0
1,020,600
1,020,600

8,310,600
Total Supply
1,982,880
1,982,880
1,324,240
1,020,600
2,000,000

2,000,000
2,000,000
2,000,000
2,000,000
2,000,000

Holding Cost
$802,175.20
$802,175.20
$693,499.60
$643,399.00
$805,000.00
$3,746,249.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
0
$500,000
2,000,000
0
$420,000
2,000,000
0
$375,000
2,000,000
0
$375,000
2,000,000
0
$400,000
10,000,000
0

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
4000000

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

2008
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
2,565,000

Northwest
0
0
576,000
0
0
576,000
576,000

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$1,994,625.00
$898,225.00
$888,000.00
$1,923,750.00

TOTAL COST

$1,857,100.00

Southwest
0
0
360,000
0
0
360,000
360,000

Upper Midwest Lower Midwest

0
0
0
0
288,000
396,000
0
0
0
0
288,000
396,000
288,000
396,000

Northeast
0
0
630,000
0
0
630,000
630,000

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$0
$0.00
$0.00
$0
$0.00
$0.00
$375,000 $513,000.00
$888,000.00
$0
$0.00
$0.00
$0
$0.00
$0.00
$888,000.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
1
4,000,000
0
4,000,000
0
20,000,000
4000000

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
315,000
0
0
315,000
315,000

2,565,000
Total Supply
0
0
2,565,000
0
0

4,000,000
-

Holding Cost
$0.00
$0.00
$898,225.00
$0.00
$0.00
$898,225.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
0
$500,000
2,000,000
0
$420,000
2,000,000
1
$375,000
2,000,000
0
$375,000
2,000,000
0
$400,000
10,000,000
2000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
6000000

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

2009
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
4,617,000

Northwest
0
0
1,036,800
0
0
1,036,800
1,036,800

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$3,590,325.00
$2,473,610.00
$1,518,400.00
$3,462,750.00

TOTAL COST

$4,119,585.00

Southwest
0
0
648,000
0
0
648,000
648,000

Upper Midwest Lower Midwest

0
0
0
0
518,400
712,800
0
0
0
0
518,400
712,800
518,400
712,800

Northeast
0
0
1,134,000
0
0
1,134,000
1,134,000

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$0
$0.00
$0.00
$0
$0.00
$0.00
$595,000 $923,400.00 $1,518,400.00
$0
$0.00
$0.00
$0
$0.00
$0.00
$1,518,400.00

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
1
4,000,000
0
4,000,000
0
20,000,000
4000000

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
567,000
0
0
567,000
567,000

4,617,000
Total Supply
0
0
4,617,000
0
0

6,000,000
-

Holding Cost
$0.00
$0.00
$2,473,610.00
$0.00
$0.00
$2,473,610.00

Location
Seattle
Denver
St. Louis
Atlanta
Philadelphia

Small Warehouse
Fixed Cost
Variable Cost
$300,000
0.2
$250,000
0.2
$220,000
0.2
$220,000
0.2
$240,000
0.2

Large Warehouse
Capacity
Number Small Fixed Cost
2,000,000
0
$500,000
2,000,000
0
$420,000
2,000,000
1
$375,000
2,000,000
0
$375,000
2,000,000
0
$400,000
10,000,000
2000000

Seattle
Denver
St. Louis
Atlanta
Philadelphia

Northwest
$2.00
$2.50
$3.50
$4.00
$4.50

Upper Midwest Lower Midwest Northeast

$3.50
$4.00
$5.00
$2.50
$3.00
$4.00
$2.50
$2.50
$3.00
$3.00
$2.50
$3.00
$3.00
$3.50
$2.50

Northwest
Southwest
Upper Midwest
Lower Midwest
Northeast
Southeast
Total Demand
Total Capacity

Demand 2007 Demand 2008 Demand 2009 Demand 2010

320,000
576000
1036800
1866240
200,000
360000
648000
1166400
160,000
288000
518400
933120
220,000
396000
712800
1283040
350,000
630000
1134000
2041200
175,000
315000
567000
1020600
1,425,000
2,565,000
4,617,000
8,310,600
10000000

Southwest
$2.50
$2.50
$3.50
$4.00
$5.00

2010
Seattle
Denver
St. Louis
Atlanta
Philadelphia
Total Demand
8,310,600

Northwest
0
0
1,866,240
0
0
1,866,240
1,866,240

Total Shipping Cost

Total Holding Cost
Warehouse Cost
Total Shipping Chg

$6,462,585.00
$5,538,747.00
$2,632,120.00
$6,232,950.00

TOTAL COST

$8,400,502.00

Southwest
0
0
1,166,400
0
0
1,166,400
1,166,400

Upper Midwest Lower Midwest

0
0
0
0
933,120
1,283,040
0
0
0
0
933,120
1,283,040
933,120
1,283,040

Northeast
0
0
2,041,200
0
0
2,041,200
2,041,200

Large Warehouse
Variable Cost
0.2
0.2
0.2
0.2
0.2

Capacity
Number Large
4,000,000
0
4,000,000
0
4,000,000
2
4,000,000
0
4,000,000
0
20,000,000
8,000,000

Warehouse Operating Costs

Fixed Cost Variable Cost
Total Cost
$0
$0.00
$0.00
$0
$0.00
$0.00
$970,000 $1,662,120.00 $2,632,120.00
$0
$0.00
$0.00
$0
$0.00
$0.00
$2,632,120.00

Southeast
$5.50
$4.50
$3.50
$2.50
$4.00

Southeast
0
0
1,020,600
0
0
1,020,600
1,020,600

8,310,600
Total Supply
0
0
8,310,600
0
0

10,000,000
-

Holding Cost
$0.00
$0.00
$5,538,747.00
$0.00
$0.00
$5,538,747.00 Total Holding