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
1
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
