Question: Question 3

The Pigskin company will produce footballs over the next six months. Forecasted demand and production costs over this time period are shown in the table below. Pigskin has a monthly production capacity of 300 cases. The company currently has 50 cases of footballs in inventory, and has enough capacity to store up to 100 cases. The holding cost of keeping a football in inventory for a month is estimated to be 5% of production cost. Pigskin has decided that they want to meet the entire demand for footballs over the 6-month period.

The selling price of the footballs is not relevant to the production decision since it is company policy to meet demand exactly when it occurs, regardless of selling price. Pigskin wants to find a production schedule that minimizes the total production and holding costs. You may assume that the company wants to have the ending inventory (at the end of month six) to be zero.

Formulate this as a transportation problem using Excel as shown in slide 50 of the PowerPoint presentation for Class 7. Solve it and submit printouts showing your Excel model. (Note that some “routes” are not feasible. For example, production in month two cannot be sold in month one, so a high cost penalty should be assigned to that cell to ensure that the “route” is not used.)