The Hunky Dory Boat Company buys boats from an independent contractor, customize them in an operation that requires only a couple of days, then either sells them directly or puts them into inventory. Due to the speed of customizing and other special conditions of operation, purchase, assembly, and sales can all be assumed to take place at the start of each period. Hunky Dory decides to develop a 2-period model. Beginning inventory of customized boats is 5 and ending inventory should be 5. Additional relevant data is provided below:

Holding customized boats in inventory for a period actually produces a revenue, because the inventory consist of docking the boats, and there are always people willing to rent the boats (so far, without hurting sales prices), yielding a net gain of $60/boat after cleanup and other expense. Backorder cost for one period $40/boat.

a.Draw a NETFORM for the problem.

b.Write the corresponding algebraic formulation and .

c.Show the change needed for the NETFORM if the company is limited to purchasing at most 60 boats in the two periods combined. What is the new optimal solution?
 

Sales upper limit Sales price ($) Purchase upper limit Purchase price ($) Customizing cost ($) Period 1 35 9000 50 3500 800 Period 2 40 9400 20 4200 800