Problem $2$

ExpressLog Logistics anticipates the need for more distribution center space to accommodate what it

believes will significantly increase demand for its final$-$mile services. ExpressLog could either lease public

warehouse space to cover all levels of demand or construct its own distribution center to meet a specified

level of demand, and then use public warehousing to cover the rest. The yearly cost of building and

operating its own facility, including the amortized construction cost, is $$12\mathrm{.}00$ per square foot. The annual

cost of leasing public warehouse space is $$20\mathrm{.}00$ per square foot. The expected demand requirements

follow:

a$.$ Calculate the expected value of leasing public warehouse space as required by demand.

b$.$ Calculate the expected value of building a $200,000-$square$-$foot distribution center and leasing public

warehouse space as required if demand exceeds the need for $200,000$ square feet of space.

c$.$ Calculate the expected value of building a $300,000-$square$-$foot distribution center and leasing public

warehouse space as required if demand exceeds the need for $300,000$ square feet of space.

d$.$ Calculate the expected value of building a $400,000-$square$-$foot distribution center and leasing public

warehouse space as required if demand exceeds the need for $400,000$ square feet of space.

e$.$ Calculate the expected value of building a $500,000-$square$-$foot distribution center.

f$.$ Which of these decisions provides the minimized expected value?

Problem $3$

Majda Lux must select a supplier for a plastic bottle and proprietary dispenser for its new hair shampoo.

Three suppliers have placed bids; at Majda's request, all bids are for a shipping quantity of $20,000$ bottles

with annual requirements of $40,000$ units. Majda's factory operates $250$ days a year. The first table shows

each supplier's price, estimated annual freight costs, and current lead times; management has added

estimates for holding costs and administrative oversight costs for each supplier.

Beyond costs, however, Majda has three other criteria considered important in the selection of a supplier.

The second table shows all the criteria, their weights, and the scores for all of them except total costs,

where a score of $1$ indicates "poor" and $10$ indicates "superior." Because all three suppliers have done

business with Majda Lux before, management will assign a score of $"10"$ to the supplier with the lowest

total annual cost, a score of $"8\mathrm{.}5"$ for the next lowest cost, and a score of $"7\mathrm{.}0"$ for the worst cost of the

three.

a$.$ Which of the three suppliers will provide the lowest annual cost to Majda Lux?

b$.$ Given Majda's criteria and weighting system, which supplier should Majda award the contract to$?$

Question $3$

$9.$ Fall$-$Line, Inc., is a Great Falls, Montana, manufacturer of a variety of downhill skis. Fall$-$Line is considering four locations for a new plant: Aspen, Colorado; Medicine Lodge, Kansas; Broken Bow, Nebraska; and Wounded Knee, South Dakota. Annual fixed costs and variable costs per pair of skis are shown in the following table:

$\backslash$table$[[$Location$,$Annual Fixed Costs,Variable Cost per Pair$],[$Aspen$,$$$8,000,000,$$$250$