Read the following case to answer questions $1,2,3,$ & $4$ below.

Logistics and Systems Analysis $$ Static vs$.$ Dynamic analyses

Senco Electronics Company currently operates three warehouses to store and process both online and retail orders. As the demand will continue to increase, Jack Kaminski, logistics manager of the company, is considering a more cost$-$effective way to change their current warehouse option. New plan is to reduce to a single mega warehouse to be able to consolidate the orders for both online and retail channels. The company conducted an analysis to evaluate the total cost impact of their current warehouse operations and the new warehouse option. The current level of annual demand is $100,000$ units.

Cost centers

Current: three warehouses

New plan: one mega warehouse

Warehouse costs

Fixed cost

$$80,000$

$$55,000$

Storage and handling

$$165,000$

$$150,000$

Inventory carrying

$$70,000$

$$65,000$

Administrative

$$55,000$

$$45,000$

Transportation costs

$$72,000$

$$115,000$

Total cost

$?$

$?$

Based on the static analysis, which warehouse incurs lower cost, and thus can be a better option?

Question $1$ options:

Current option: three warehouses

New option: one mega warehous

Total costs for both options are the same.

It cannot be determined based on static analysis.

Question $2($Mandatory$)(10$ points$)$

Saved

Now based on the information in the case above, conduct a dynamic analysis. At what level of demand per year would current and new warehouse options become equal $($point of indifference$)?$

Question $2$ options:

$76,508$ units

$100,000$ units

$115,000$ units

$192,308$ units

Question $3($Mandatory$)(10$ points$)$

If annual demand increases to $300,000$ units, what will be the total cost for one mega warehouse option?

Question $3$ options:

$$430,000$

$$804,000$

$$1,180,000$

$$1,923,070$

Question $4($Mandatory$)(10$ points$)$

In addition to cost factors, you may consider other advantages and disadvantages of the two warehouse options. If you were Jack Kaminski, which warehouse option would you choose? What can be potential disadvantages of the option you choose? Briefly discuss.