The Raleigh Soap Company has been offered a 5-year contract to manufacture and package a leading Project 4: Build a new warehouse. The brand of soap for Taker Bros. It is understood that the existing warehouse will be inadequate for contract will not be extended past the 5 years because the greater production. It is estimated that Taker Bros. plans to build its own plant nearby. 400 square meters of additional warehouse is The contract calls for 10,000 metric tons (one met- needed. A new warehouse can be built on a ric ton equals 1000kg ) of soap a year. Raleigh lot beside the existing warehouse for $225,000, normally produces 12,000 metric tons of soap a including the land. The annual taxes, insurance, and other ownership costs would be $5000 a year. It is believed the warehouse could be sold at the end of 5 years for $200,000. year, so production for the 5-year period would be increased to 22,000 metric tons. Raleigh must decide Project 5: Lease a warehouse. An alternative what changes, if any, to make to accommodate this to building an additional warehouse would be increased production. Five projects are under considto lease warehouse space. A suitable warehouse eration. one mile away could be leased for $15,000 per year. The $15,000 includes taxes, insur- Project 1: Increase liquid storage capacity. ance, and so forth. The annual cost of moving Raleigh has been forced to buy caustic soda in tank truck quantities owing to inadequate storage capacity. If another liquid caustic soda tank is installed to hoid 1000 cubic meters, the caustic soda may be purchased in railroad tank car quantities at a more favorable price. The result would be a saving of 0.1/ per kilogram materials to this more remote warehouse would of soap. The tank, which would cost $83,400, be $34,000 a year. has no net salvage value. Project 2: Acquire another sulfonation unit. The present capacity of the plant is limited by the sulfonation unit. The additiona! 12,000 metric tons of soap cannot be produced without an additional sulfonation unit. Another unit can be installed for $320,000. Project 3: Expand the packaging department. With the new contract, the packaging department must either work two 8-hour shifts or have another packaging line installed. If the two-shift operation is used, a 20% wage premium must be paid for the second shift. This premium would amount to $35,000 a year. The second packaging line could be installed for $150,000. It would have a $42,000 salvage value at the end of 5 years