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ssibility Investigate Tropical Smoothie Cafe requires a distribution center for its Atlanta and Northern GA stores. It is considering using a contract warehouse, where


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ssibility Investigate Tropical Smoothie Cafe requires a distribution center for its Atlanta and Northern GA stores. It is considering using a contract warehouse, where it could rent space for $20 per square foot per month and estimates the variable cost of operating in this facility at $10 per square foot. Another location could be leased, using a triple-net lease for an expected fixed cost of $50,000 per month and variable operating costs of $8 per square foot. Finally, a warehouse could be purchased which would have expected fixed cost of $100,000 per month and variable operating costs of $4 per square foot. A) At what volume and cost are contracting and leasing economically equal? B) At what volume and cost are contracting and purchasing economically equal? C) At what volume and cost are leasing and purchasing economically equal? I D) Graph the total cost lines and state the range of output where each warehousing alternative is superior. (Graph paper provided on next page.)

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