Scenario Double Olive Oil. Ltd. is a producer of high-quality Olive oil. The company buys raw Olives directly from large agricultural companies and refines them into Olive oil that it sells in the wholesale market. The company has a maximum input capacity of 150 tons of raw Olives every day (or 54,750 tons per year). Of course the company cannot run at full capacity every day as it is required to shut down or reduce capacity for maintenance periods every year, and it experiences the occasional mechanical problem. The facility is expected to run at 90% capacity over the year (or on average 150 x 90% = 135 tons per day). Double Olive Oil is planning to purchase its supply of raw Olives from three primary growers, Supplier A, Supplier B, and Supplier C. Purchase prices will not set until the orders are actually placed so Double Olive Oil will have to forecast purchase prices for the raw material and sales prices for the refined Olive oil. The contract is written such that Double Olive Oil is only required to commit to 75% of total capacity up front. Any amounts over that can be purchased only as required for the same price. Historical prices for the last 15 years are in the table below (note that year 15 is the most current year). Olive Oil Average Price Average Price Index Index Marketing Year $/ton $/ton 1 163.7 287.8 234569 172.4 455 212 642.2 220 634.2 254 761.3 222 702 260 911 8 337.2 1013 9 416 1267.3 10 442.8 1302 11 451 1376 12 572 1634 13 518 1307.4 14 418 1142.4 15 414 1304.4 Olive oil contains a number of fatty acids, some which are desirable in food products and others that are not. One desirable fatty acid is Oleic acid. Double Olive Oil produces high Oleic oil for the wholesale market and requires that the Oleic acid content be a minimum of 76%. Olive oil also contains trace amounts of lodine. The market requires that that lodine content be a minimum of 0.77% and maximum of 0.87% The Oleic acid and lodine content for the Olives from the three suppliers is given in the table below. Supplier A B Oleic Acid lodine 63% 0.85% 74% 0.70%