Hank Leighton is the Vice President of Purchasing for the consumer electronics division of the Major Electric Corporation (MEC). The company recently introduced a new type of video camcorder that has taken the market by storm. Although Hank is pleased with the strong demand for this product in the market place, it has been a challenge to keep up with MEC's distributors' orders of this camcorder. His current challenge is how to meet requests from MEC's major distributors in Pittsburgh, Denver, Baltimore, and Houston who have placed orders of 10,000, 20,000, 30,000, and 25,000 units, respectively, for delivery in two months (there is a one-month manufacturing and one-month shipping lead time for this product). MEC has contracts with companies in Hong Kong, Korea, and Singapore who manufacture camcorders for the company under the MEC label. These contracts require MEC to order a specified minimum number of units each month at a guaranteed per unit cost. The contracts also specify the maximum number of units that may be ordered at this price. The following table summarizes these contracts: Monthly Purchasing Contract Provisions Supplier Hong Kong Unit Cost $375 Korea $390 Singapore $365 Minimum Required 20,000 25,000 15,000 Maximum Allowed 30,000 40,000 30,000 MEC also has a standing contract with a shipping company to transport product from each of these suppliers to ports in San Francisco and San Diego. The cost of shipping from each supplier to each port is given in the following table along with the minimum required and maximum allowable number of shipping containers each month: Monthly Shipping Contract Provisions San Francisco Shipping Requirements San Diego Shipping Requirements Cost per Minimum Maximum Container Containers Containers Cost per Container Minimum Containers Supplier Hong Kong $2,000 5 20 $2,300 5 Korea $1,800 10 30 $2,100 10 Singapore $2,400 5 25 $2,200 5 282 Maximum Containers 20 30 15 Under the terms of this contract, MEC guarantees it will send at least 20 but no more than 65 shipping containers to San Francisco each month, and at least 30 but no more than 70 shipping containers to San Diego each month. Each shipping container can hold 1,000 video cameras. The containers will ultimately be trucked from the seaports on to the distributors. Again, MEC has a standing contract with a trucking company to provide trucking services each month. The cost of trucking a shipping container from each port to each distributor is summarized in the following table. Unit Shipping Cost per Container Pittsburgh Denver Baltimore Houston San Francisco $1,100 $850 $1,200 $1,000 San Diego $1,200 $1,000 $1,100 $900