EXAMPLE 2

After reviewing the plan developed in the preceding example, planners have decided to develop an alternative plan. They have learned that one person is about to retire from the company. Rather than replace that person, they would like to stay with the smaller workforce and use overtime to make up for the lost output. The reduced regular-time output is 280 units per period. The maximum amount of overtime output per period is 40 units. Develop a plan and compare it to the previous one.

 SOLUTION

 

Refer to Example 3 in the textbook. Given the following information set up the problem in a transportation table and solve for the minimum-cost plan: (Omit the “$” sign in your response.)

  

	PERIOD
	1		2	3
Demand		550	700	750
Capacity
Regular		500	500	500
Overtime		50	50	50
Subcontract		120	120	100
Beginning inventory		100
Costs
Regular time	$	60 per unit
Overtime	$	80 per unit
Subcontract	$	90 per unit
Inventory carrying cost	$	1 per unit per month
Back-order cost	$	3 per unit per month

 

Minimum total cost

$ [removed]