Homework Answers
Answer: Option A Rent the warehouse and pay for utilities is most economic option as it has lowest cost of $ 130500
A) Calculation of total cost for option A:
Rental Cost for the year= 10000 x 12 = $ 120000
Utilities Cost for the year= (2000 x 6 x 0.5)+(1500x 6 x 0.5) = $ 10500
Total Cost = $ 130500
B) Calculation of total cost for option B:
Rent for the year(rent includes utilities) = 12000 x 12 =$ 144000
Total Cost = $ 144000
C) Calculation of total cost for option C:
Cost of Building an energy efficient warehouse = $ 20,000,000
Utilities cost for the year = 1500 x 12 x 0.5 = $ 9000
(-) Sale proceeds of energy efficient warehouse = (-)$ 19,000,000
Total Cost = $ 10,09,000
Option A Rent the warehouse and pay for utilities is most economic option as it has lowest cost of $ 130500
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