20 .Super performance parts(spp) produces braking devices exclusively for the Ace motor company. an automotive manufacturer. SPP has been leasing warehouse space at a public facility 20 miles from the company's plant SPP has been approached by a group of four other Ace suppliers with the idea of building a consolidated warehouse to gain transportation and materials handling economies. An investment of $150,000 would be required by each of the five companies to acquire the warehouse. Payment of the initial investment secures five years of participation in the agreement. Annual operating expenses are anticipated to be $36,000 for each party. SPP is currently charged $8,000 per month for use of the public warehouse facilities. SPP's outbound transportation from the public warehouse often consists of LTL quantities. Its annual outbound transportation bill is currently $345,000. SPP expects consolidated warehousing to more fully utilize truckload quantities with transportation expenses shared among the supplier pool. SPP's annual outbound bill would be reduced by 25 percent in the consolidated plan. Differences in inbound transportation costs are assumed negligible in this case. a. Compare the storage and shipping costs associated with consolidated warehousing as opposed to SPP's current, direct shipping plan. Are any efficiencies apparent through consolidation? b. Aside from potentially reducing costs, how else might SPP benefit by participating in the consolidated warehouse? c. What disadvantages might exist in a consolidated warehouse as opposed to a direct-shipping situation? 22. Comfy Mattresses Inc. is opening a new plant in Orlando, Florida. Ron Lane, distribution manager, has been asked to find the lowest cost outbound logistics system. Given an annual sales volume of 31,000 mattresses, determine the costs associated with each option fixed warehouse investment can be depreciated evenly over 10 years. b. Rent space in a public warehouse 10 miles from the plant. The public warehouse requires no fixed investment but has variable costs of $7 per unit. Outbound contract carrier transportation would cost $14.50 per unit on average. The carrier also charges $7 per unit to deliver the mattresses to the warehouse from the plant. c. Contract the warehousing and transportation services to the Freeflow Logistics Company, an integrated logistics firm with a warehouse location 25 miles from the plan. Freeflow requires a fixed investment of $125,000 and charges $25 per unit for all services originating at the plant. The fixed investment covers a 10-year agreement with Freeflow. d. Name a few advantages aside from cost that the low-cost alternative above may have over the other alternatives