DISC 212 – Introduction to Management Science

Quiz 4
Roll # _____________________________
Sailco corporation must determine how many sailboats should be produced during each of the
next four quarters (one quarter = three months). The demand during each of the next four
quarters is as follows: first quarter, 40 sailboats; second quarter, 60 sailboats; third quarter, 75
sailboats; fourth quarter, 25 sailboats. Sailco must meet demands on time. At the beginning of
the first quarter, Sailco has an inventory of 10 sailboats. At the beginning of each quarter, Sailco
must decide how many sailboats should be produced during that quarter. For simplicity, we
assume that sailboats manufactured during a quarter can be used to meet demand for that quarter.
Sailco can produce up to 40 sailboats with regular-time labor at a total cost of $400 per sailboat.
By having employees work overtime during a quarter, Sailco can produce additional sailboats
with overtime labor at a total cost of $450 per sailboat. At the end of each quarter (after
production has occurred and the current quarter’s demand has been satisfied), a carrying or
holding cost of $20 per sailboat is incurred. Formulate and solve an LP to determine a production
schedule to minimize the sum of production and inventory costs during the next four quarters.

Let.

S1: No. of Sailboats to be produced in Q1 by Regular Emp

S2: No. of Sailboats to be produced in Q2 by Regular Emp

S3: No. of Sailboats to be produced in Q3 by Regular Emp

S4: No. of Sailboats to be produced in Q4 by Regular Emp

O1: No. of Sailboats to be produced in Q1 by Overtime Emp

O2: No. of Sailboats to be produced in Q2 by Overtime Emp

O3: No. of Sailboats to be produced in Q3 by Overtime Emp

O4: No. of Sailboats to be produced in Q4 by Overtime Emp

Let It (t=1,2,3,4) No. of sail boats in inventory at end of quarter.

Min Z = 400 (S1 + S2 + S3 + S4) + 450(O1 + O2 + O3 + O4) + 20(I1 + I2 + I3 + I4)

ST

S1, S2, S3, S4 <= 40

Inventory at end of quarter t = inventory at end of quarter (t -1) + quarter t production -

quarter t demand/Sold

I1 = 10 + S1 + O1 – 40 -> I1 – S1 – O1 = -30
I2 = I1 + S2 + O2 – 60 -> I2 – I1 – S2 – O2 = -60

I3 = I2 + S3 + O3 – 75 -> I3 – I2 – S3 – O3 = -75

I4 = I3 + S4 + O4 – 25 -> I4 – I3 – S4 – O4 = -25

For All St, Ot, It >=0 Where t = 1,2,3,4