OPERATIONS MANAGEMENT CUSTOM ACCESS
OPERATIONS MANAGEMENT CUSTOM ACCESS
11th Edition
ISBN: 9780135622438
Author: KRAJEWSKI
Publisher: PEARSON EDUCATION (COLLEGE)
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Chapter 14, Problem 11P

Acadia Logistics anticipates that it will need more distribution center space to accommodate what it believes will be a significant increase in demand for its final—mile services. Acadia could either lease public warehouse space to cover all levels of demand or construct its own distribution center to meet a specified level of demand, and then use public warehousing to cover the rest. The yearly cost of building and operating its own facility, including the amortized cost of construction, is $12.00 pa” square foot. The yearly cost of leasing public ware house space is $20.00 per square foot. The expected demand requirements follow:

Chapter 14, Problem 11P, Acadia Logistics anticipates that it will need more distribution center space to accommodate what it

  1. Calculate the expected value of leasing public warehouse space as required by demand.
  2. Calculate the expected value of building a 200,000-square-foot distribution center and leasing public warehouse space as required if demand exceeds the need for 200,000 square feet of space.
  3. Calculate the expected value of building a 300,000-square-foot distribution center and leasing public warehouse space as required if demand exceeds the need for 300,000 square feet of space.
  4. Calculate the expected value of building a 400,000-square-foot distribution center and leasing public warehouse space as required if demand exceeds the need for 400,000 square feet of space.
  5. Calculate the expected value of building a 500,000-square-foot distribution.
  6. Which of these decisions provides the minimized expected value?

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