Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle packages destined for ground delivery. The contract calls for $9 million in annual fixed charges, which covers the provider’s overhead and warehouse costs, and variable costsof $15 per package shipped. Recently, Donegal Footwear found a warehouse it could lease at a cost of $16 million per year, which includes lease costs, labor, and management oversight. Furthermore, the company found another provider who would deliver packages from the warehouse for $6.00 per package. Considering only costs, how many packages must Donegal Footwear ship to make the vertical integration into warehouse operations beneficial?
Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle packages destined for ground delivery. The contract calls for $9 million in annual fixed charges, which covers the provider’s overhead and warehouse costs, and variable costsof $15 per package shipped. Recently, Donegal Footwear found a warehouse it could lease at a cost of $16 million per year, which includes lease costs, labor, and management oversight. Furthermore, the company found another provider who would deliver packages from the warehouse for $6.00 per package. Considering only costs, how many packages must Donegal Footwear ship to make the vertical integration into warehouse operations beneficial?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle packages destined for ground delivery. The contract calls for $9 million in annual fixed charges, which covers the provider’s overhead and warehouse costs, and variable costs
of $15 per package shipped. Recently, Donegal Footwear found a warehouse it could lease at a cost of $16 million per year, which includes lease costs, labor, and management oversight. Furthermore, the company found another provider who would deliver packages from the warehouse for $6.00 per package. Considering only costs, how many packages must Donegal Footwear ship to make the vertical integration into warehouse operations beneficial?
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