Solutions Operations management

Solution) The production manager of Koulder Refrigerators must decide how many refrigerators to produce in eac

Question: The production manager of Koulder Refrigerators must decide how many refrigerators to produce in each of the next three months to meet demand at the lowest overall cost. There is a limited capacity in each month, and costs are expected to increase. If there are any items left in inventory at the end of a month, they incur a carrying cost. The relevant information is provided in the table below.

Month	Capacity	Demand	Cost of production per unit	Carrying cost per unit per month
1	130	100	$80 per unit	$4.00
2	140	130	$90 per unit	$4.50
3	170	160	$95 per unit	$5.00

Management wants to have at least 15 units left at the end of month 3 to meet any unexpected demand at that time. The linear program and is shown below. Solve this on the computer and answer the questions that follow.

The variables are defined as:

X₁ = number of units produced in month 1	N₁ = number of units left at end of month 1
X₂ = number of units produced in month 2	N₂ = number of units left at end of month 2
X₃ = number of units produced in month 3	N₃ = number of units left at end of month 3