During the next four months, a customer requires,respectively, 500, 650, 1000, and 700 units of acommodity, and no backlogging is allowed (that is,the customer’s requirements must be met on time).Production costs are $50, $80, $40, and $70 per unitduring these months. The storage cost from one monthto the next is $20 per unit (assessed on ending inventory). It is estimated that each unit on hand at the endof month 4 can be sold for $60. Assume there is nobeginning inventory.a. Determine how to minimize the net cost incurred inmeeting the demands for the next four months.b. Use SolverTable to see what happens to the decisionvariables and the total cost when the initial inventoryvaries from 0 to 1000 in 100-unit increments. Howmuch lower would the total cost be if the companystarted with 100 units in inventory, rather than none?Would this same cost decrease occur for every100-unit increase in initial inventory?
During the next four months, a customer requires,
respectively, 500, 650, 1000, and 700 units of a
commodity, and no backlogging is allowed (that is,
the customer’s requirements must be met on time).
Production costs are $50, $80, $40, and $70 per unit
during these months. The storage cost from one month
to the next is $20 per unit (assessed on ending inventory). It is estimated that each unit on hand at the end
of month 4 can be sold for $60. Assume there is no
beginning inventory.
a. Determine how to minimize the net cost incurred in
meeting the demands for the next four months.
b. Use SolverTable to see what happens to the decision
variables and the total cost when the initial inventory
varies from 0 to 1000 in 100-unit increments. How
much lower would the total cost be if the company
started with 100 units in inventory, rather than none?
Would this same cost decrease occur for every
100-unit increase in initial inventory?
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