Please show all work. ices and handle packages destined for ground delivery. The

Question

Please show all work.

ices and handle packages destined for ground delivery. The contract calls for $7 milion in annual fixed Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse servi charges, which covers the provider's overhead and warehouse costs, and variable costs of $1500 per package shipped. Recently, Danegal Faotwsar found a warehouse it could lease at a cost of $15 million per year, which includes lease costs, labor, and management oversight Fur deliver packages from the warehouse for $11.00 per package. Considering only costs, how many packages must Donegal Footware ship to make the vertical integration into warehouse operations beneficial? rthemore, the company found another provider who would Donegal Footwear must ship packages to make the vertical integration i to warehouse operations beneficial En eryour eso nse a3 en integer

Explanation / Answer

Vertical integration would involve :

Let the required volume at which such integration would be possible = N

At volume = N , Total cost at present should be equal to total cost after vertical integration

Total cost = Fixed cost + Total variable cost = Fixed cost + Variable cost / unit x N

Accordingly,

Total cost at present = 7,000000 + 15.N

Total cost after vertical integration = 15,000000 + 11.N

Thus , for the vertical integration to be successful :

7,000000 + 15N = 15,000000 + 11.N

Or, 4.N = 8,000000

Or, N = 2,000000 ( 2 million )

DONEGAL FOOTWARE MUST SHIP 2,000000 PACKAGES TO MAKE VERTICAL INTEGRATION INTO WAREHOUSE OPRRATIONS BENEFICIAL

DONEGAL FOOTWARE MUST SHIP 2,000000 PACKAGES TO MAKE VERTICAL INTEGRATION INTO WAREHOUSE OPRRATIONS BENEFICIAL

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