THE MCS CORPORATION PROJECT

AMEYA SAMPAT & HUY NGUYEN

Operation Research Methods
Professor Sharkey
12/06/2012

Introduction/Problem Background
The MCS Corporation, producers of the toy Dinoball, is interested in maximizing profits while minimizing
production cost. Acting as advisors to the company, our group was charged to find the answers to three questions to
helpMCS reach the most cost-efficient production method. The first question was Should they remove the balanced
policy that requires each of MCS production facilities to produce the same number of toys? The second question was,
Should MCS Corporation install FastProd, a system that would allow for faster and cheaper production of Dinoballs?
The third question involves a green initiative that the MCS Corporation is pursuing. In order to lower the carbon
emission to below the permitted limit of 10 metric ton, the company has an option to install a certain number of solar
panels per facilities. The installation would help reduce a cost that certain facilities would incur that would drive overall
cost.
To answer the questions, an analysis was done in excel using Operations Research Methods which could be
applied to develop a decision choice. The following report details the findings of the report and will walk through the
steps used to come to that decision.

Removal of the Policy

Defining the Problem
Currently, MCS operates under the policy that each facility will produce the same number of DinoBall toys each month.
In other words, the facilities are balanced in that each will produces exactly 1/3 of MCSs DinoBall monthly demand.
MCS Corporation also operates under the idea of equal wear and tear on each production line at a particular facility.
Equal wear and tear is a current MCS Corporation implement the requires every production line at a facility run for
the same length of time during a month. For the purposes of this analysis, we will assume that a month consists of
four 40 hour weeks (for a total of 160 hours).
MCS Corporation is considering removing the policy that each facility is responsible for the same number of toys. MCS
Corporation is interested in determining the amount of savings that would result from this decision. The equal wear
and tear policy on the production lines will remain in place.
The analysis below calculates the total operation costs of the two scenarios: operation system with the balance policy
and operation system without the balance policy. The savings from the removing the policy will then be calculated and
considered for decision making.
Analysis
The monthly total demand table below was obtained by summing the demand of all locations.

Total
Month
Demand
January
1425
February
1475
March
1525
April
1575
May
1450
June
1480
July
1430
August
1500
September
1300
October
1475
November
1875
December
2300
Table 1a: Monthly Demand

In this analysis, the operation cost is defined as the sum of production cost and shipping cost. The monthly production
cost is calculated by Excel Solver which uses simplex method providing a minimum cost given constraints.

Operation with Balance Policy

Our group used Excel Solver to calculate monthly production cost and shipping cost. Below is an example of the cost
calculation (for December) and an explanation for how we formulated the cost.

Troy, NY
Prod Line 1
Prod Line 2
Prod Line 3

Decision
Energy
Energy Variables
Time
No. of
Units/hour (KW)/hour Cost/Hr
(Hrs)
Limit(Hrs)
Cost
Products
6
200
0.15 85.185185
160 2555.555556 511.111111
2
255
3258.333333 170.37037
1
275
3513.888889 85.1851852 Demand
Total No. of Products:
766.666667 766.6667

Newark, NJ
Prod Line 1
Prod Line 2
Prod Line 3

5
2
1

210
255
275

0.18 95.833333

Harrisburg,
PA
Prod Line 1
Prod Line 2
Prod Line 3

4
3
0.5

220
235
300

0.09 102.22222

160

3622.5
4398.75
4743.75
Total No. of Products:

479.166667
191.666667
95.8333333 Demand
766.666667 766.6667

160

2024 408.888889
2162 306.666667
2760 51.1111111 Demand
Total No. of Products:
766.666667 766.6667
Total cost 29038.7778
Total Supply
2300
Total Demand
2300
Table 1b: Sample of Production Cost Calculation for Balance Policy Operation

Parameter explanation:

Decision variables: the time each production line in a particular factory operates. They are determined by Excel
Solver as an optimal solution to minimize production cost. Since MCS uses the equal wear and tear policy, all
three production lines in each factory will have the same operating time. Each of the decision variables has to be
smaller than the 160 hour time limit, the maximum amount of time a machine can operate every month.

Cost=

Cost is the production cost for each production line. Total cost

is the sum of all costs from all production lines.

No. of Products = Unit Variables X Decision Variable. The total number products of each factory has to be equal
to exactly 1/3 of the monthly demand due to balance policy
Total cost is what Excel Solver tries to minimize. It is the production cost for that month (in this case December).

# Units Shipped
Troy, NY
Newark, NJ
Harrisburg, PA
Total
Demand
# of Trips
Troy, NY
Newark, NJ
Harrisburg, PA
Total Capacity
Troy, NY
Newark, NJ
Harrisburg, PA

Pittsburgh Cleveland Buffalo Philadelphia

Boston New York ProvidenceHartford Total
Supply
0
0
175
0
400
0
150 41.66667 766.6667 766.6667
0
0
0 183.3333
0
475
0 108.3333 766.6667 766.6667
300
200
0 266.6667
0
0
0
0 766.6667 766.6667
300
200
175
450
400
475
150
150
2300
2300
300
200
175
450
400
475
150
150
Pittsburgh Cleveland Buffalo Philadelphia
Boston New York ProvidenceHartford
0
0
1
0
2
0
1
1
0
0
0
1
0
2
0
1
2
1
0
2
0
0
0
0
Pittsburgh Cleveland Buffalo Philadelphia
Boston New York ProvidenceHartford
0
0
250
0
500
0
250
250
0
0
0
250
0
500
0
250
500
250
0
500
0
0
0
0
Total Unit shipping cost
727.6978
Total Trip Cost
1125.333
Total Cost
1853.031
Table 1c: Example of Shipping Cost Calculation for Balance Policy Operation

Parameter explanation:

# Units shipped: the amount of products shipped from a particular factory to a particular destination. These are
determined by Excel Solver to minimize the total shipping cost. The total amount of units shipped from each
factory has to be equal to the supply of that factory (i.e. Total No. of products in Table 1b). The total amount of
units shipped to each retailer has to be equal to the demand of that retailer.
# of Trips: the number of trips it takes to ship the amount of products from one particular factory to particular
retailer. Example: it takes 2 trips to ship 300 products from Harrisburg to Pittsburgh. Each trip can only carry a
maximum of 250 products. These are also determine by Excel Solver.
Total Capacity = # of Trips X 250. The # of Units shipped always has to be smaller than this number.
Total Unit Shipping cost = Sum (# Units shipped X Shipping Costs Per Unit). The shipping cost per unit is provided
by MCS in project data.
Total Trip cost = Sum # of Trips X Shipping Costs Per Trip). The shipping cost per trips provided by MCS in project
data.
Total Cost = Total Unit Shipping cost + Total Trip cost. This is the shipping cost and the objective function that
Excel Solver tries to minimize.

For each month, tables like above are created to calculate the operation cost. The operation cost is the sum of shipping
cost and production cost. The results are recorded in the Table 1d below.

Month
January
February
March
April
May
June
July
August
September
October
November
December

Production
Cost( with
Balance)
17991.42
18622.69
19253.97
19885.25
18307.06
18685.82
18054.54
18938.33
16413.22
18622.69
23672.92
29038.78
237486.70

Shipping
cost(with
Balance)
1218.56
1305.16
1329.26
1384.96
1344.20
1347.12
1356.83
1332.48
1277.37
1300.78
1508.80
1853.03
16558.55

Total Demand
1425
1475
1525
1575
1450
1480
1430
1500
1300
1475
1875
2300
Total
Table 1d: Monthly Operation cost with Balance Policy

Operation cost
with Balance
19209.98
19927.85
20583.23
21270.21
19651.25
20032.94
19411.37
20270.81
17690.59
19923.48
25181.72
30891.81
254045.25

Operation without Balance Policy

Using the similar technique as described above with operation with balance policy, with the exception of the demand
constraint (the total number products of each factory has to be equal to exactly 1/3 of the monthly demand due to
balance policy-Table 1b parameter explanation), we obtained the operation cost without the balance policy. In addition,
the production cost and shipping are done simultaneously. The example of an integrated model (for July) is shown
below.

Troy
PL1
PL2
PL3

Units Energy Energy Decision

Time
No. of
/hour (KW)/hr Cost/Hr Variables Limit(Hrs) Cost
Products
6
200
0.15
25.55556
160
766.6667 153.3333
2
255
160
977.5 51.11111
1
275
160
1054.167 25.55556
Total # Products:
230

NJ
PL1
PL2
PL3

5
2
1

210
255
275

0.18

PA
PL1
PL2
PL3

4
3
0.5

220
235
300

0.09

160

160
0
160
0
160
0
Total # Products:

160
3168
160
3384
160
4320
Total # Products:
Total Production cost
Total # Products:

0
0
0
0
640
480
80
1200
13670.33
1430

Total Demand
1430

# Units Shipped
Pittsburgh
Cleveland Buffalo Philadelphia Boston New YorkProvidence Hartford Total
Troy, NY 0
0
0
0
200
0
0
30
230
NJ
0
0
0
0
0
0
0
0
0
PA
180
200
125
250
0
250
100
95
1200
Total
180
200
125
250
200
250
100
125
1430
Demand 180
200
125
250
200
250
100
125
# of Trips
Pittsburgh
Cleveland Buffalo Philadelphia Boston New YorkProvidence Hartford
Troy, NY 0
0
0
0
1
0
0
1
NJ
0
0
0
0
0
0
0
0
PA
1
1
1
1
0
1
1
1
Total Capacity
Pittsburgh
Cleveland Buffalo Philadelphia Boston New YorkProvidence Hartford
Troy, NY 0
0
0
0
250
0
0
250
NJ
0
0
0
0
0
0
0
0
PA
250
250
250
250
0
250
250
250
Total Unit shipping cost
656.416
Total Trip Cost
1079.467
Total Cost
15406.22
Table 1e: Example of Operation Cost Calculation for Operation w/o Balance Policy

Supply
230
0
1200
1430

The balance policy is removed so each factory is free to produce as many products as they can without demand
constraints as long as their total production equals the total demand. The supply constraints (the total amount of units
shipped from each factory has to be equal to the supply of that factory, i.e. total no. of products) still remain. For
example, Troy produces 230 products, which means only a maximum of 230 units can be shipped from Troy. Since the
model is now integrated, the objective function is now to minimize the Total Cost (= Unit shipping cost + Total Trip Cost
+ Total Production Cost) instead of two separate objective function as in balance policy operation. This Total Cost is
calculated for each month and recorded in the table below.

Month

Total Demand

Operation cost without Balance

Policy

January

1425

15357.95

February

1475

15882.90

March

1525

16473.15

April

1575

17248.13

May

1450

15676.39

June

1480

15981.15

July

1430

15406.22

August

1500

16192.08

September

1300

13781.25

October

1475

15939.77

November

1875

21009.41

December

2300

26312.83

18810

205261.22

Total

Table 1f: Monthly Operation cost without Balance Policy

Comparison
From Table 1d and 1f, the table below is created in order to compare the cost regarding balance policy.
Operation cost
Operation cost
Total
with Balance
without Balance
Percent
Month
Demand
Polivicy
Policy
of savings
January
1425
19209.9767
15357.9533
20.1%
February
1475
19927.85
15882.9
20.3%
March
1525
20583.2344
16473.1533
20.0%
April
1575
21270.21
17248.13
18.9%
May
1450
19651.2511
15676.3867
20.2%
June
1480
20032.944
15981.1473
20.2%
July
1430
19411.3729
15406.216
20.6%
August
1500
20270.8133
16192.08
20.1%
September
1300
17690.5911
13781.2533
22.1%
October
1475
19923.4767
15939.7667
20.0%
November
1875
25181.7167
21009.4067
16.6%
December
2300
30891.8089
26312.8267
14.8%
Total
254045.246
205261.22
19.2%
Total Savings
48784.0258
19.2%
Table 1g Total Operation Costs Comparison regarding Balance Policy

Conclusion
After reviewing table 1g, it was determined that the most cost effective choice would be to operate the facilities
without balance. Where balance is defined as production levels are the same. The findings indicate that the total cost
of operating with balance is $254,045.24 and the total without balance being $205,261.22. This would mean a savings of
$48,784.02. Thus, a choice to choosing a production system without balance policy would be the best way of reaching
MCS Corporations objective of lowering its cost across the board unless the cost of restructuring is higher than
$48,784.02, which is approximately 19.2% of total operation cost of balance operation.

Installation of FastProd
Defining The Problem
As mentioned before, MCS Corporation was challenged with the question of whether or not to install a new
system called FastProd. This system was designed not only to replace the existing production line, but it was designed
to turn out DinoBalls at a faster rate and conserve more energy. Although the choice to install this new system seems
trivial, the decision was complicated by the requirement that MCS Corporation had to purchase a new system for each
of their factories in order for any deal to occur.
In order to make any decisions and have more leverage during a negotiation, MCS Corporation requested that
their reserve price be calculated. The reserve price was the maximum amount that MCS Corporation was willing to
pay for a certain type of contract. Below are the series of steps used to calculate and the reserve prices of the two types
of systems.
Analysis
We took similar approach as we did with the removal of policy problem. The operation costs were calculated using Excel
Solver. All the production characteristics were changed to FastProd characteristics. An example of this is shown in the
table below.

Troy, NY
Prod Line 1
Prod Line 2
Prod Line 3

Decision
Energy
Energy Variables
Time
Units/hour (KW)/hour Cost/Hr
(Hrs)
Limit(Hrs)
Cost
8
300
0.15 31.944444
160 1341.666667
8
300
1341.666667
8
300
1341.666667
Total No. of Products:

Newark, NJ
Prod Line 1
Prod Line 2
Prod Line 3

8
8
8

300
300
300

0.18 31.944444

Harrisburg,
PA
Prod Line 1
Prod Line 2
Prod Line 3

8
8
8

300
300
300

0.09 31.944444

160 1341.666667
1341.666667
1341.666667
Total No. of Products:

No. of
Products
255.555556
255.555556
255.555556 Demand
766.666667 766.6667
255.555556
255.555556
255.555556 Demand
766.666667 766.6667

160 1341.666667 255.555556

1341.666667 255.555556
1341.666667 255.555556 Demand
Total No. of Products:
766.666667 766.6667
Total cost
12075
Total Supply
2300
Total Demand
2300
Table 2a: Sample of Fast Production Cost Calculation for Balance Policy Operation for December

To get an understanding of how much MCS Corporation was willing to pay, the cost of operating the previous system for
three years with balance and without balance was calculated and compared to the cost of operating the FastProd with
balance and without balance. The table below shows our findings.

Month
January
February
March
April
May
June
July
August
September
October
November
December
Total
3-year Total
3 Year Difference

Normal
FastProd
Normal
Operation cost
Operation cost
Operation cost
FastProd Operation
with Balance
with Balance
without Balance
cost with Balance
Policy
Policy
Policy
Policy
19209.97667
8699.81
15357.95333
6728.808333
19927.85
9048.905556
15882.9
6971.245
20583.23444
9335.512222
16473.15333
7142.821667
21270.21
9653.71
17248.13
7365.918333
19651.25111
8956.695556
15676.38667
6881.536667
20032.944
9117.121778
15981.14733
6984.492
19411.37289
8864.328444
15406.216
6713.108667
20270.81333
9207.48
16192.08
7031.246667
17690.59111
8102.368889
13781.25333
6156.336667
19923.47667
9044.532222
15939.76667
6959.958333
25181.71667
11352.55
21009.40667
8709.691667
30891.80889
13928.03111
26312.82667
10535.94
254045.2458
115311.0458
205261.22
88181.104
762135.7373
345933.1373
615783.66
264543.312
416202.6
351240.348
Table 2 Operation Cost Comparison Table

In order to determine the reserve price, the production costs (for normal operation with balancing, FastProd with
balancing, normal operation without balancing and FastProd without balancing) were calculated by summing the
monthly rate for a 12 month period, with numbers at the top of the column representing January and the bottom being
December. This then was multiplied by three as the company requested a three year period to be analyzed. Then the
difference was taken of the respective systems and their new counterparts to determine the reserve price of a system
balanced and unbalanced.

Conclusion
In this specific situation, MCS Corporation did not request a specific decision to be made. Instead, they asked to
find the reserve price that represents the maximum price they were willing to pay for a certain type of contract. The
reserve price for a system that uses balancing was $416,202.60 and the reserve price for a system without balancing
amounted to $351,240.35. Based solely off these numbers, MCS Corporation would have to pay more money for a
system that uses balancing than a system that doesnt.

Implementing the Green Initiative

Defining the Problem
Following the ever growing trend of going green and the desire to be in compliance with future government restrictions,
MCS Corporation desired to reduce their monthly combustion emissions to less than or equal to 10 metric tons across
its facilities. To do this, they are looking into purchasing solar panels that would have a life cycle of five years and allow
the company to receive a credit of .2 metric tons of emissions monthly for every panel installed. The panels would be
outfitted at certain locations and would produce energy for 1000 KW hours. Each panel cost $18000. In addition, MCS
Corporation can purchase carbon credits to offset emissions over their threshold. So with that information, MCS
Corporation would like to know how many solar panels to purchase and how many carbon credits they should purchase
at a specific price for carbon credit.
Analysis
The analysis will be done separately for the two cases: balance splitting policy and optimal splitting
Balance Splitting Policy
First, we calculated the total amount of carbon credit needed for each month and the number of solar panels and their
optimal locations. At this stage, the price of a carbon credit is unknown so we temporarily assumed carbon credit
purchase does not exist for calculation purposes.
We use the same table that we used for problem 1(removal of policy). To this table, we added two variable columns:
emissions per products and total emissions. A solar panel table is also added to calculate the cost of solar panels and
how to locate solar panel placement so that the cost is minimal. An example of our calculation (for November) is in table
3a on the following page.
Parameter explanation:

Total Emission= emission per product X # products. This gives the amount of emission of each production line.
The total emission of the whole company was also calculated as the sum of all emission.
# solar panels: the number of solar panels are placed at a particular factory determined by Excel Solver
Cost/month: Cost of having an extra solar panel. Each solar panel cost $18,000 over five years which is an
equivalent of $300/month
KWh/Unit: each solar panel provides its factory 1000 kWh of free energy. The total KWh is the total amount of
free energy each factory gets.
Total C credits: .2 X # solar panels. Total carbon credit that a factory gets for installing solar panels.
Energy cost save = total KWh X energy cost (KW) per hour. The amount of money each factory saves due to free
energy provided by solar panels. This has to be smaller than the sum of production cost of that factory.
Emission - solar carbon credits= total emission - total C credit. This number has to be lower than 10 (metric tons)
in order to meet the Green Initiative requirement.
Solar Cost = # solar panels X cost/month. The total cost of installing all solar panels in that month.
Total cost = sum (cost) + solar cost - sum (energy cost save). The total cost of production.
All other parameters are explained previously in removal of policy problem.
Excel Solver is set to minimize to total tost and returns tecision tariables of tours of each factory run and amount
of solar panels each factory installed.

Troy, NY
Prod Line 1
Prod Line 2
Prod Line 3
Newark, NJ
Prod Line 1
Prod Line 2
Prod Line 3
Harrisburg, PA
Prod Line 1
Prod Line 2
Prod Line 3

Emissions
Energy
Energy
Units
per
(KW)
Total
Cost Decision Hours
per
product
per
Emission (KW)
Var
Limit
hour
hour
per Hour
6
2
1

5
2
1

200
255
275

210
255
275

0.005
0.01
0.014

2.083333
1.388889
0.972222

0.15

69.4444

Cost

#
Demand
Products

160 2083.33 416.6667

160 2656.25 138.8889
160 2864.58 69.44444
Total # Products:
625

625

0.008
0.01
0.014

3.125
1.5625
1.09375

0.18

78.125

160 2953.13 390.625

160 3585.94 156.25
160 3867.19 78.125 Demand
Total # Products:
625
625

4
220
0.0009
3
235
0.01
0.5
300
0.015
TOTAL EMISSION

0.3
2.5
0.625
13.65069

0.09

83.3333

160
1650 333.3333
160 1762.5
250
160
2250 41.66667 Demand
Total # Products:
625
625
Total Products
1875
1875

Cost
# solar
KWh
Total
Total C
Energy cost
/mont
panels
/unit
Kwh
credit
save
h
Troy, NY
0
300
1000
0
0
0
Newark, NJ
19
300
1000
19000
3.8
3420
Harrisburg, PA
0
300
1000
0
0
0
Emission - Solar Carbon credits = 9.85069
Carbon Limit
10
Solar cost
5700
Total cost
25952.9
Table 3a Example of calculation to find optimal solar panels installment
The results of this calculation are summarized in the table below.
# solar panels
Jan
Feb
Troy, NY
0
0
Newark, NJ
2
4
Harrisburg, PA
0
0
Cost w solar
18231 19103
C credit needed 0.3745 0.7385
Table 3b Solar panels analysis

Mar
0
6
0
19974
1.1026

Apr
0
8
0
20845
1.4666

May
0
3
0
18667
0.5565

Jun
0
4
0
19166
0.7749

Jul
0
3
0
18415
0.4109

Aug
0
5
0
19538
0.9206

Sep
0
0
0
16413
0

Oct
0
4
0
19103
0.7385

Nov
0
19
0
25953
3.6507

We realize that no matter how many solar panels MCS Corporation need, they will locate them at Newark, NJ for
optimal cost. Hence, we know that the extra cost that each solar panel brings is 300- 1000(.18) = $120/month or
$1440/year (because each solar panels cost $300 but save 1000 KWh at the energy cost of .18/KWh in Newark).
Next, we do the analysis to help MCS decide the number of panels to buy depending on price.

Dec
0
34
0
33119
6.7449

The algorithm: we increase price of carbon credit from $0/carbon credit until the extra cost of buying all carbon credit is
equal or higher than the extra cost of buying all carbon credit and one solar panel. We keep repeating the process for n
amount of solar panels (i.e. we increase price of carbon credit until the extra cost of buying all carbon credit and n solar
panels is equal or higher than the extra cost of buying all carbon credit and n+1 solar panels). The reason that this
algorithm works is that, as the price of carbon credit increases, our demand for carbon credit purchase decreases and
our demand for solar panels increases. The table below shows the calculation. Case 1 represents the decision and cost
when MCS buys n solar panels, case 2 represents the decision and cost when MCS buys n+1 solar panels.
The Excel Solver will try to maximize C credit price from 0 until the total extra cost of case 1 equal or barely surpasses
the cost of case 2. The results below can be interpreted as if a carbon credit price is $654.55 or below it is optimal for
MCS to buy 0 solar panels and only purchase Carbon credit to meet their green initiative.
Case 1

Case 2

C credit
price

# solar
panels

654.5455

0
0

Solar parnels extra cost (1yr)

C credit needed
C credit - solar credit(case 1)
C credit - solar credit(case 2)
C credit purchase cost 1
C credit purchase cost 2
Objective fucntion

C credit
price

Jan
0.374528
0.374528
0.174528
245.1455
114.2364
654.5455

Feb
0.738546
0.738546
0.538546
483.4121
352.503

Mar
1.102565
1.102565
0.902565
721.6788
590.7697

Apr
1.466583
1.466583
1.266583
959.9455
829.0364

May
0.556537
0.556537
0.356537
364.2788
233.3697

Jun
0.774948
0.774948
0.574948
507.2388
376.3297

# solar
panels

654.5455
1
1440
Jul
Aug
0.41093 0.920556
0.41093 0.920556
0.21093 0.720556
268.9721 602.5455
138.063 471.6364

Sep
0
0
-0.2
0
0

Oct
0.738546
0.738546
0.538546
483.4121
352.503

Nov
3.650694
3.650694
3.450694
2389.545
2258.636

Total
Dec
6.744852
6.744852
6.544852
4414.812 11440.99
4283.903 10000.99

Total extra cost 1

Total extra cost 2
11440.98667
11440.98667
Table 3c Cabon Purchase Price vs. Solar panels analysis

Parameter Explanation:

C credit price: the price for one carbon credit. This is the same for both cases. This value is increased from 0 until
the total extra cost 1 >= total extra cost 2.
# solar panels: the number of solar panels purchased for each case.
Solar panels extra cost = # solar panels X $1440 because each solar panels cost extra $1440/year.
C credit needed: the total amount of carbon credit that goes over 10 metric ton limit and need to be
compensated by either solar panels or Carbon credit purchase
C credit - solar credit = C credit needed - 0.2 X # solar panels. The amount of Carbon credits left after using solar
panels carbon credit aka the carbon credit needed to be purchase
C credit purchase cost = C credit price X (C credit - solar credit). The cost each month to purchase carbon credit.
This cost is not applied for months that have their (C credit - solar credit) value smaller or equal to 0, such as
September in this example.
Total extra cost = Solar panels extra cost + C credit purchase cost.

From the analysis, the result table below is created. The table shows the range of Carbon credit price and the optimal
number of solar panels should be purchased (e.g. If the price of carbon credit is $1000(which is between $991.71 and
$1564.27, then it is optimal for MCS to buy exactly four solar panels). When the price is above $9941.19, it is simply not
beneficial for MCS to buy any Carbon credits and they should install all 34 solar panels. At prices such as $3600 or $7200,
there are multiple optimal solutions for how many solar panels should be bought. It depends on the companys
preferences and/or unlisted cost (cost of installation, cost of maintenance) to decide.

Carbon credit Price

(per carbon credit)
From
To
0
654.54545
654.54545 662.21274
662.21274 814.72541
814.72541 991.70771
991.70771 1564.2728
1564.2728 2049.633
2049.633
2400
2400
3086.2654
3086.2654
3600
3600
3600
3600
3600
3600
3600
3600
3600
3600
3600
5744.0443
5744.0443
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
9941.1915
Above 9941.192
Table 3d

Optimal
number of
solar
panels
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Optimal Splitting
We apply a similar method for optimal splitting. First, we calculated the total amount of carbon credit needed for each
month and the number of solar panels and their optimal locations. The results are shown below.
# solar panels
Troy, NY
Newark, NJ

Harrisburg,
PA
Carbon Credit

Jan
0
0

Feb
0
0

Mar
0
0

Apr
0
0

May
0
0

Jun
0
0

0
0

0
0

0
0

0
0

0
0

0
0

Jul
0
0
0
0

Aug
0
0

Sep
0
0

Oct
0
0

Nov
7
0

Dec
22
0

0
0
0
0
0
0
0
0 1.376 4.3982
Cost difference
968.99
3300

Table 3e

We noticed that November and December are the only two months that exceed the Carbon limit. We also realized that
MCS Corporation will need to locate solar panels at Troy, NY for optimal cost. Hence, we know that the extra cost that
each solar panels bring is 300- 1000(.15) = $150/month or $1800/year (because each solar panels cost $300 but save
1000 KWh at the energy cost of .15/KWh in Troy).
Next, we do the analysis to help MCS decide on the number of panels to buy depending on price. We apply the same
algorithm that we used for balance splitting. However, for the optimal splitting, we add a constraint that the amount of
energy saves always has to be smaller than the amount of energy used at that factory. This constraint did not appear on
the analysis for balance splitting because it is always true for that scenario.
An example of the example is shown on the next page. The parameter stays the same except:

Solar panels purchase cost = 3600 X solar panels. The cost of purchasing solar panels is used instead of extra cost
(purchase cost-energy saving cost).
Total energy used in Troy: the maximum amount of energy that can be saved using solar panels.
Energy saving cost = Min (total energy used in Troy X .15, # solar panels X 150). Constraint that the amount of
energy saves always smaller than the amount of energy used at that factory.
Total cost = solar panels purchase cost + C credit purchase cost - energy saving cost

Decision
variable
Solar
panels
purchase
cost(1 yr)
C credit
needed
C credit solar
credit(case
1)
C credit solar
credit(case
2)
C credit
purchase
cost 1
C credit
purchase
cost 2
Total
Energy
used in
Troy
Energy
saving
cost(case
1)
Energy
saving
cost(case
2)
Objective
function

Case 1
C
#
credit
solar
price panels

Case 2
C
#
credit
solar
price panels

11351

11351

21

75600

22

79200

Total

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

1.376

4.3982

-4.2

-4.2

-4.2

-4.2

-4.2

-4.2

-4.2

-4.2

-4.2

-4.2

2.824

0.1982

-4.4

-4.4

-4.4

-4.4

-4.4

-4.4

-4.4

-4.4

-4.4

-4.4

3.024

-0.002

2250

2250

22306

22306

26361

28389

20278

22306

18656

24333

8111.1

24333

54750

89222

3150

3150

3150

3150

3041.7

3150

2798.3

3150

1216.7

3150

3150

3150

35407

3300

3300

3300

3300

3041.7

3300

2798.3

3300

1216.7

3300

3300

3300

36757

11351
Total cost 1

Total cost 2

42443.33332

42443.33332

Table 3f Carbon Purchase Price vs. Solar panels analysis

From the analysis, the result table below is created. The table shows that the range of Carbon credit price and the
optimal number of solar panels should be purchased. When the price is above $11350.9, it is simply not beneficial for
MCS to buy any Carbon credits and they should install all 22 solar panels. At prices such as $4500 or $9750, there are
multiple optimal solutions for how many solar panels should be bought. It depends on the company preferences and/or
unlisted costs (cost of installation, cost of maintenance) to decide.

Carbon credit Price

(per carbon credit)
From
To
0
4500
4500
4500
4500
4500
4500
4500
4787.234
4787.234
9000
9000
9666.667
9666.667
9750
9750
9750
9750
9750
9750
9750
9750
9750
9750
10008.33
10008.33
10500
10500
11041.67
11041.67 11350.9
Above 11350.9

Optimal
number of
solar
panels
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Conclusion

Balance Splitting
Carbon credit Price
(per carbon credit)
From
To
0
654.54545
654.54545 662.21274
662.21274 814.72541
814.72541 991.70771
991.70771 1564.2728
1564.2728 2049.633
2049.633
2400
2400
3086.2654
3086.2654
3600
3600
3600
3600
3600
3600
3600
3600
3600
3600
3600
5744.0443
5744.0443
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
7200
9941.1915
Above 9941.192
Table 3h

Optimal
number of
solar panels
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Optimal Splitting
Optimal
Carbon credit Price
number of
(per carbon credit)
solar
From
To
panels
0
4500
0
4500
1
4500
2
4500
3
4500
4
4500
5
4500
4787.234
6
4787.234
9000
7
9000
9666.667
8
9666.667
9750
9
9750
10
9750
11
9750
12
9750
13
9750
14
9750
15
9750
16
9750
17
9750
10008.33
18
10008.33
10500
19
10500
11041.67
20
11041.67 11350.9
21
Above 11350.9
22

After a thorough analysis of the data, it was determined that the decision to buy more carbon credit would have to be
made depending on the current situation at the time. With that being said, the research showed that price ranges could
be made (reference carbon credit price ranges in table 3h) and then could dictate how many solar panels the company
should install. Referencing table 3h, the company could look at the price of the current carbon credit and then install the
optimal choice of solar panels, followed by purchasing more carbon credits if need be. This solution to the problem
would allow the MCS Corporation the ability to estimate how many carbon credits and solar panels to buy in the future.