Four Warehouse options have information about the various costs to help make a good economic decision on which is the best choice. Use a formula to calculate each of the yellow boxes on the Warehouse problem page. Note: On variable cost you should use the cost per pallet info to get your final answer. You may use cost per pound to calculate but I would not recommend doing so. At present, the plan is to store 30 million pounds of frozen product in a leased warehouse. Cells B13, D13, F13, and G13 are the final total cost for each option and are in gray. Make sure to show your formulas for full credit. All the information and calculations may or may not be needed to calculate cost as there are multiple ways and formulas to get to the correct answers. All of the yellow and gray highlighted boxes must be populated even if you do not use them in the final calculation. The text box at the bottom should contain a brief explanation of why you chose a specific option. All options have good access to the interstate highway system. Option 4 has a rail dock and the others do not. The hours of operation at Options 1 and 2 are 5 am to 1 am while Options 3 and 4 are open from 5:30 am to 1:30 am. Options 1 and 2 use the same outside freight hauler to make deliveries, Option 4 uses a service that uses special software that allows you to track exactly where the trailer is from the time it leaves the warehouse, and Option 3 operates it’s own fleet of trailers. Assume each pallet is stored in the warehouse for 30 days or less.
Warehouse Problem See instruction tab for further information
Option 1 Option 2 Option 3 Option 4
Lease cost $ 250,000 $ 100,000 $ 750,000 – 0
Pallet charge in 12.00 14.00 – 0 20.00
Pallet charge out 12.00 12.50 – 0
Pallet storage charge per month 5.00 10.00 7.50 20.00
Freight charge per truck from warehouse to plant 125.00 150.00 100.00 150.00
Miles to plant 15 23 8 9
Variable cost per pallet or total pounds lbs per pallet Pallets per truck Pallets per year Trucks per year trucks per month trucks per week
Variable cost per pound NA 30,000,000 1350 20
Best option at 30 million pounds
Why did you select this option?
I am trying to decide whether to purchase an inkjet printer or a laserjet printer for home use. For an Inkjet, I can purchase a HP Envy 5055 for $80 from Best Buy. For a laserjet, I like the Brother HL-L5100 which goes for $150 from Staples. Now printing cost are different for the two options. Ink cost for a laserjet costs about $.02 per page to print, while an inkjet will cost about $.10 per page for ink. Paper for each printer is $.015 per page and electricity is $.05 per page. Due to special maintenance needs, the inkjet incurs a cost of $.005 per page.
A) For my printer problem, determine the cross-over point (pages) for the two options, and B) Briefly explain what I should do if COST is my only concern.
Cells require a calulation formula.
Cells may require an input Break-even
BEP = F/(P-V) BEP – Break-even point
Inkjet Printer Laser Printer Profit at volume F – Fixed cost
Prof = (P-V)*Q – F V – Variable cost per unit
Required volume for given profit
Q = (Prof + F)/(P-V) Profit –
Q – Quantity Sold
Total Fixed Cost Total Fixed Cost
X-Over Point Point of Indifference
per page per page (F2-F1)/(V1-V2)
per page per page
per page per page
per page per page
Total Variable Cost Total Variable Cost
Volume Pages Inkjet Cost Laserjet Cost Total Cost = F + V*Q or F + V*X
100 (We are using X as our target quantity (or Q). It is the quantity at which total costs for two options are equal.
300 Plot the total costs for the two alternatives showing the crossover point below.
400 The X-over video should be helpful and the chart shown in this video is what your chart should look like but with different numbers
At what volume will both Locations have the same cost (x-over point)?
X-Over = (F2-F1)/(V1-V2)
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