Pavlick Products supplies a key component for automobile interiors to U. S. assembly plants. The components can be manufactured in China or Mexico. Unit cost in China is $ 333, and the unit cost in Mexico is $ 350. However, shipping costs per 500 units are $ 10,000 from China, and only $ 2,000 from Mexico and are expected to increase 4% each month from China and 1% each month from Mexico. Each unit is sold to the automotive customer for $ 400. Contracts with the Chinese vendor require that a minimum of 2,500 units be produced each month. Demand for the next 12 months is estimated to be:

The Mexican plant is new and is gearing up production; its capacity will increase over the next year as follows:

How should the company source production to maximize total profit?

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Demand 14,000 16,000 14,000 14,000 16,000 10,500 14,000 20.000 20,000 16,000 14,000 10,500 January February March Aprill June July August September November December Mexican Piant Capacity January February March April May June July August September October November December 2,500 5,000 7,500 10,000 12,500 15,000 15,000 15,000 15,000 15,000 15,000