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Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle
Donegal 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 $55 million in annual fixed charges, which covers the provider's overhead and warehouse costs, and variable costs of $12.00 per package shipped. Recently, Donegal Footwear found a warehouse it could lease at a cost of $19 million 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 Donegal Footware ship to make the vertical integration into warehouse operations beneficial?
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