UAC Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle packages destined for ground delivery. The contract calls for $900,000 in annual fixed charges, which covers the provider's overhead and warehouse costs, and variable costs of $12.00 per package shipped. Recently, UAC Footwear found a warehouse it could lease at a cost of $2,000,000 per year, which includes lease costs, labor, and management oversight. Furthermore, the company found another provider who would deliver packages from the warehouse for $10.00 per package. Considering only costs, how many packages must UAC Footware ship to make the vertical integration into warehouse operations beneficial?
How many packages must UAC Footwear ship to make the vertical integration into warehouse operations beneficial? Show your work for credit.
Ans
Let the number of package shipped by UAC footwear to make warehouse operations viable is X.
then for getting to same cost structure:
900000+12*X= 2000000+10*X, solving for X,
X=550000
thus UAC needs to ship 550000 parcels or more.
UAC Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses...
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