A new warehouse costs $100,000. There is no practical limit to the number of drums a warehouse can hold. It takes 60 days to build a warehouse and the cost of the warehouse is incurred as soon as construction begins.

Jacobs pays insurance and other out-of-pocket holding costs on chemicals once production is complete. These holding costs for one drum for one year is $100, whether the drum is en route to a warehouse or the drum is physically in a warehouse. There are no such holding costs for work-in-process inventory in the factory.