1. The manufacturing plant of National Brand Corporation has agreed to supply its best 2 customers with their number 1 product. Customer A will be supplied for 3 months and customer B will be supplied for 2 months. Currently, the company has a beginning inventory of 50 cases and aiming to have 100 cases of inventory at the end of 3^rd month. Table 1 shows the monthly requirements of the 2 customers.

 

Any cases left unsold in a month would cost the company P1.00 per case to carry it the following month and unmet demand in a month may be satisfied in future months but results to a penalty cost of P2.00 per case per month.

a. The plant may directly ship these goods to the customers but the transportation costs are expensive. Thus, they decided to set up a depot that will be nearer to these two customers. The depot has a capacity of 100 cases per month. The cost of transporting a case from the plant to the depot is P6.00. The table below shows the transportation costs per route. The monthly capacity of the company is constant at 350 cases. The plant cannot delay deliveries to the depot but they can do it in advance. On the other hand, the depot can delay deliveries to the customers and they can also do it in advance.

  
 

Customers. A B Table 1: Monthly Requirements 1 250 Monthly Requirements (in cases) 2 400 300 3 275 550