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Intro To Management SC (Exercise Answer)

The document describes a mathematical optimization problem faced by a retail store in Des Moines, Iowa that receives shipments of a product from two different locations. It provides the following details: - The decision variables are x (units from Kansas City) and y (units from Minneapolis) - The objective is to minimize the total shipping cost of 0.20x + 0.25y - There is a constraint that x + y must be greater than or equal to the demand of 5000 units - Additional constraints are that x is less than or equal to 4000 units and y is less than or equal to 3000 units - The problem is to determine the optimal order quantities from each location to meet demand at minimum cost

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982 views8 pages

Intro To Management SC (Exercise Answer)

The document describes a mathematical optimization problem faced by a retail store in Des Moines, Iowa that receives shipments of a product from two different locations. It provides the following details: - The decision variables are x (units from Kansas City) and y (units from Minneapolis) - The objective is to minimize the total shipping cost of 0.20x + 0.25y - There is a constraint that x + y must be greater than or equal to the demand of 5000 units - Additional constraints are that x is less than or equal to 4000 units and y is less than or equal to 3000 units - The problem is to determine the optimal order quantities from each location to meet demand at minimum cost

Uploaded by

Loka
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Exercise (Q1)

A retail store in Des Moines, Iowa, receives shipments of a particular product from Kansas
City and Minneapolis. Let
x = number of units of the product received from Kansas City
y = number of units of the product received from Minneapolis

a. Write an expression for the total number of units of the product received by the retail
store in Des Moines.

b. Shipments from Kansas City cost $0.20 per unit, and shipments from Minneapolis
cost $0.25 per unit. Develop an objective function representing the total cost of shipments
to Des Moines.

c. Assuming the monthly demand at the retail store is 5000 units, develop a constraint
that requires 5000 units to be shipped to Des Moines.

d. No more than 4000 units can be shipped from Kansas City, and no more than 3000
units can be shipped from Minneapolis in a month. Develop constraints to model this
situation.

e. Of course, negative amounts cannot be shipped. Combine the objective function and
constraints developed to state a mathematical model for satisfying the demand at the
Des Moines retail store at minimum cost.
Answer
 a. Total units received = x + y

b. Total cost = 0.20x + 0.25y

c. x + y = 5000

d. x 4000 Kansas City


y 3000 Minneapolis

e. Min 0.20x + 0.25y


s.t.
x + y = 5000
x 4000
y 3000
x, y 0
Exercise
(Q2 & Q3)
Q2
The O’Neill Shoe Manufacturing Company will produce a special-style shoe if the
order size is large enough to provide a reasonable profit. For each special-style
order, the company incurs a fixed cost of $1000 for the production setup. The
variable cost is $30 per pair, and each pair sells for $40.

a. Let x indicate the number of pairs of shoes produced. Develop a mathematical


equation for the total cost of producing x pairs of shoes.

b. Let P indicate the total profit. Develop a mathematical equation for the total
profit realized from an order for x pairs of shoes.

c. How large must the shoe order be before O’Neill will break even?
Q2 (With answers)
The O’Neill Shoe Manufacturing Company will produce a special-style shoe if the
order size is large enough to provide a reasonable profit. For each special-style
order, the company incurs a fixed cost of $1000 for the production setup. The
variable cost is $30 per pair, and each pair sells for $40.

a. Let x indicate the number of pairs of shoes produced. Develop a mathematical


equation for the total cost of producing x pairs of shoes.
  𝑇𝐶 =1000 + 30 𝑥
b. Let P indicate the total profit. Develop a mathematical equation for the total
profit realized from an order for x pairs of shoes.
 

c. How large must the shoe order be before O’Neill will break even?
𝑇𝐹𝐶 1000 1000  
 
𝑥= = = =100 or,
𝑃− 𝑉 40 −30 10
Q3
Eastman Publishing Company is considering publishing a paperback textbook on
spreadsheet applications for business. The fixed cost of manuscript preparation, textbook
design, and production setup is estimated to be $80,000. Variable production and material
costs are estimated to be $3 per book. Demand over the life of the book is estimated to be
4000 copies. The publisher plans to sell the text to college and university bookstores for
$20 each.

a. What is the breakeven point?

b. What profit or loss can be anticipated with a demand of 4000 copies?

c. With a demand of 4000 copies, what is the minimum price per copy that the publisher
must charge to break even?

d. If the publisher believes that the price per copy could be increased to $25.95 and not
affect the anticipated demand of 4000 copies, what action would you recommend?
What profit or loss can be anticipated?
Q3 (With answers)
Eastman Publishing Company is considering publishing a paperback textbook on
spreadsheet applications for business. The fixed cost of manuscript preparation, textbook
design, and production setup is estimated to be $80,000. Variable production and material
costs are estimated to be $3 per book. Demand over the life of the book is estimated to be
4000 copies. The publisher plans to sell the text to college and university bookstores for
$20 each.

a. What is the breakeven point? 4706

b. What profit or loss can be anticipated with a demand of 4000 copies?


Loss of $12,000
c. With a demand of 4000 copies, what is the minimum price per copy that the publisher
must charge to break even?
$23

d. If the publisher believes that the price per copy could be increased to $25.95 and not
affect the anticipated demand of 4000 copies, what action would you recommend?
What profit or loss can be anticipated?
Should increase price as it will generate a profit of $11,800

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