Debating whether to construct large crossdock facility

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Reference no: EM134002581

Question

Bahouth Ltd. is planning for the next two years of production and debating whether to construct a large crossdock facility with forty truck bays or a smaller one with twenty truck bays. The cost to build the large facility is $1.8 million and cost to build small one is $1.2 million. If they construct a large facility and demand is as high as they hope then operating costs are $450,000 annually. If they construct a a large facility and demand is low then operating costs are $300,00. If they construct a small facility and demand is low, operating costs are $275,000. But if they experience high demand, operating costs of a small facility increases to $600,000. After having conducted some market research they feel that the likelihood of high demand is 0.6 and the likelihood of small demand is 0.4. With the info given, determine total <operating and building> cost of the best alternative for a two year period.

Reference no: EM134002581

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