Reference no: EM131920682

Problem :

A computer manufacturer is developing a production schedule for the next five months (say March -- July). Demands for this manufacturer's laptop computer in the next five months are forecasted to be 1200, 2100, 1500, 1000, and 800, respectively.

Assume that it costs this manufacturer $1200 to produce each laptop computer. At the end of each month, a holding cost of $300 per computer left in inventory is incurred. Increasing production from one month to the next incurs costs for hiring and training new employees. It is estimated that a cost of $2000 per computer is incurred if production is increased from one month to the next.

Decreasing production from one month to the next incurs costs for laying off employees, loss of morale, and so forth. It is estimated that a cost of $1800 per computer is incurred if production is decreased from one month to the next.

All demands must be met on time, and the units produced in one month can be used to meet demand for the current month as well as for future months. In the current month (February), 1500 laptop computers were produced.

Assume that at the beginning of March, there are 100 computers in inventory.

Questions:

Formulate a Linear Programming model for this problem and solve it via ASPE (Excel Solver).

Check Figure: ~$9.50million-9.55million. (I need help with the Increase/ Decrease Variables)

What is the optimal solution? Briefly explain it.

Production Cost
		M o n t h
		March	April	May	June	July
Beginning Inventory		100	500	0	0	0
Units Produced	1500	1,600	1,600	1,500	1,000	800
Units Demanded		1,200	2,100	1,500	1,000	800
Ending Inventory		500	0	0	0	0
Unit Produced Increase Cost		2,000	2,000	2,000	2,000	2,000
Unit Produced Decrease Cost		-1,800	-1,800	-1,800	-1,800	-1,800
Unit Produced Change		100	0	-100	-500	-200
Unit Production Cost		1,200	1,200	1,200	1,200	1,200
Unit Carrying Cost		300	300	300	300	300
Unit Produced Change Cost		200,000	0	180,000	900,000	360,000
Monthly Production Cost		$1,920,000	$1,920,000	$1,800,000	$1,200,000	$960,000
Monthly Carrying Cost		$150,000	$0	$0	$0	$0
Monthly Production Change Cost		$200,000	$0	$180,000	$900,000	$360,000
					Total Cost	$9,590,000