Lon Min has developed a specialized airtight vacuum bag to extend the freshness of seafood shipped to restaurants. He has put together the following demand cost data:

Initial inventory = 250 units
Regular time cost = $1.00/unit
Overtime cost = $1.50/unit
Subcontracting cost = $2.00/unit
Carrying cost = $0.50/unit/quarter
Back-order cost = $0.50/unit/quarter
Min decides that the initial inventory of 250 units will incur the 20Ï•/unit cost from each prior quarter (unlike the situation in most companies, where a 0 unit cost is assigned).
(a) Find the optimal plan using the transportation method.
(b) What is the cost of the plan?
(c) Does any regular time capacity go unused? If so, how much in which periods?
(d) What is the extent of backordering in units anddollars?

Transcribed Image Text:

Forecast Regular Over- Sub contract 100 100 100 100 Quarter (units) 500 750 900 450 time 400 400 800 400 time 80 80 160 80