Leasing public warehouse space as required by demand

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Reference no: EM132304418

Archana 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. Archana 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 ?$11.00 per square foot. The yearly cost of leasing public warehouse space is ?$21.00 per square foot. Show all work.

Requirements

(in sq. ft) 230,000 430,000 630,000 830,000

Probability 0.3 0.4 0.1 0.2

a. Calculate the expected value of leasing public warehouse space as required by demand.

b. Calculate the expected value of building a 200,000-squarefoot distribution center and leasing public warehouse space as required if demand exceeds the need for 200,000 square feet of space.

c. Calculate the expected value of building a 300,000-squarefoot distribution center and leasing public warehouse space as required if demand exceeds the need for 300,000 square feet of space.

d. Calculate the expected value of building a 400,000-squarefoot distribution center and leasing public warehouse space as required if demand exceeds the need for 400,000 square feet of space.

e. Calculate the expected value of building a 500,000-squarefoot distribution.

f. Which of the above decisions provides the minimized expected value?

Reference no: EM132304418

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