Chapter 6, Problem 1.3C

Trips Logistics, a third-party logistics firm that provides warehousing and other logistics services, is facing a decision regarding the amount of space to lease for the upcoming three-year period. The general manager has forecast that Trips Logistics will need to handle a demand of 100,000 units for each of the next three years. Historically, Trips Logistics has required 1,000 square feet of warehouse space for every 1,000 units of demand. For the purposes of this discussion, the only cost Trips Logistics faces is the cost for the warehouse. Trips Logistics receives revenue of $1.22 for each unit of demand. The general manager must decide whether to sign a three-year lease or obtain warehousing space on the spot market each year. The three-year lease will cost $1 per square foot per year, and the spot market rate is expected to be $1.20 per square foot per year for each of the three years. Trips Logistics has a discount rate of k = 0.1.

The Northwoods General Store in Vermont sells a variety of outdoor clothing items and equipment and several food products at its modern but rustic-looking retail store. Its food products include salmon and maple syrup. The store also runs a lucrative catalog operation. One of its most popular products is maple syrup, which is sold in metal half-gallon cans with a picture of the store on the front. Maple syrup was one of the first products the store produced and sold, and it continues to do so. Setting up the syrup-making equipment to produce a batch of syrup costs $450. Storing the syrup for sales throughout the year is a tricky process because the syrup must be kept in a temperature-controlled facility. The annual cost of carrying a gallon of the syrup is $15. Based on past sales data, the store has forecasted a demand of 7,500 gallons of maple syrup for the coming year. The store can produce approximately 100 gallons of syrup per day during the maple syrup season, which runs from…

Quantum Ltd. (QL) was created by a group of university students who completed film school and wanted to create feature films using Canadian locations and Canadian film crews. QL’s management team knows that there may be difficulties working in some locations due to terrain, weather, and availability of personnel trained to work in the film industry. As a result, QL is going to set up training programs to allow interested Canadians to take unpaid internships to shadow QL’s film crews and learn the trade so on a future film individuals can obtain paid positions. QL believes this will also give it an advantage in the film industry, as it will be creating an effective and efficient film-making team.   QL’s office staff is working to prepare a film schedule including film topics, locations, and available film workers. QL feels it can pay competitive salaries to qualified personnel working on its films. The average feature film takes 90 days to complete, from storyboard creation to the final…