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Case Study Production Planning Problem

Bollinger Electronics Company produces two different electronic components for a major
airplane engine manufacturer. The monthly requirements for components for each of the next
three months are given below.
Demand
April May June
322A 1000 3000 5000
802B 1000 500 3000

The production department must develop a three month production plan for the components. For
which the production manager will require types of data total production cost, inventory holding cost
and change-in-production-level costs.
Production Cost
April May June
322A 20 20 20
802B 10 10 10

Bollinger determined that on a monthly basis holding costs are 1.5% of the cost of the product
for both the components. Bollinger also estimated the cost associated with increasing the
production level for any month is $0.50 per unit increase. And similarly the cost associated with
the decreasing the production level for any month is $0.50 per unit decrease.

The beginning and the ending inventory of both the components is as mentioned below:

Beginning Ending
Inventory Inventory
322A 500 400
802B 200 200

Machine, labor and storage requirements for components are as given below:

Machine Labor Storage


(sq.
(hrs/unit) (hrs/unit) ft./unit)
322A 0.1 0.05 2
802B 0.08 0.07 3

Machine, labor and storage capacities for components are as given below:
Capacity
Machine Labor Storage
Hrs. Hrs. (sq.ft.)
April 400 300 10000
May 500 300 10000
June 600 300 10000

The production levels of the Month March had been 1500 units of component 322A and 1000
units of component 802B. Formulate the Production planning problem into LPP.

Case Study Blending Problem

Grand Strand Oil Company produces regular-grade and premium-grade gasoline products by
blending three petroleum components. The gasolines are sold at different prices, and the
petroleum components have different costs.

The firm wants to determine how to blend the three components into the two products in such a
way as to maximize profits. Data available show that the regular-grade gasoline can be sold for
$2.90 per gallon and the premium-grade gasoline for $3.00 per gallon. For the current
production-planning period, Grand Strand can obtain the three components at the costs and in the
quantities shown below.
Component
1 2 3
Cost/Gal 2.50 2.60 2.84
Gal/Avl 5000 10000 10000

The product specifications for the regular and premium gasoline is also shown below, restrict the
amounts of each component that can be used in each gasoline product. Current commitments to
distributors require Grand Strand to produce at least 10,000 gallons of regular grade gasoline.
Formulate the LPP.

Regular
Max Comp 1 30%
Max Comp 3 20%
Min Comp 2 40%

Premium
Min Comp 1 25%
Min Comp 3 30%
Max Comp 2 45%