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A manufacturer of diabetic blood testing equipment is determining its production schedule for the next 6 months. Assume that it costs this company $150

 
 

A manufacturer of diabetic blood testing equipment is determining its production schedule for the next 6 months. Assume that it costs this company $150 to manufacture each glucometer. Moreover, if the manufacturer decides to produce any glucometers during a month it incurs a setup cost of $10,000 per month. At the end of each month, a holding cost of $35 per glucometer left in inventory is incurred. The current inventory policy stipulates that no more than 200 glucometers can be stored in inventory at any point in time. Monthly demands for glucometers are projected to be as follows: 150 in month 1; 175 in month 2; 165 in month 3; 156 in month 4; 169 in month 5; and 178 in month 6. Assume that at the beginning of month 1, 10 glucometers are in inventory. Finally, current production constraints limit the number of glucometers that can be produced to 300 per month. Formulate and solve an IP model to help this company find a cost-minimizing production schedule that meets all demands on time each month.

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