The problem is to determine the marketing, production, distribution, inventory strategy that maximizes profit.

Assume that there is no inventory at the start of the first period and there should be no inventory at the end of the planning horizon. All other plant overhead is assumed to be constant and can be ignored for this analysis. Also, ignore integer restrictions; that is, assume that fractional units can be manufactured, stored, etc. (For reporting purposes, you can round everything off to the nearest tenth.)

Question (the part of the problem I am stuck on): Based on the following information, how would STORAGE COSTS be incorporated into the LP model? Only in the objective function? Or, both objective function and constraints? If so, please provide methodology.

• Plant A storage costs from one period to the next: Widgets $7.50, Gadgets $5.50, Flugels $6.50
• Plant A combined storage (all three products) maximum: 70 units
• Plant B storage costs from one period to the next: Widgets $7.80, Gadgets $5.70, Flugels $7.00
• Plant B combined storage (all three products) maximum: 50 units
• TOTAL production requirements (Plant A + Plant B):

Period 1: Widgets 70, Gadgets 200, Flugels 140

Period 2: Widgets 125, Gadgets 300, Flugels 175

Period 3: Widgets 185, Gadgets 295, Flugels 205

Period 4: Widgets 190, Gadgets 245, Flugels 235

Period 5: Widgets 200, Gadgets 240, Flugels 230