Question
Top-sider Boat Shuttle Services Inc. is in the process of increasing its total fleet capacity from 60 passengers to 120 passengers. It currently has 10
Top-sider Boat Shuttle Services Inc. is in the process of increasing its total fleet capacity from 60 passengers to 120 passengers. It currently has 10 boats that have a capacity of 6 passengers each. For any of its existing boats, the company has the option of (a) keeping it and introducing minor repairs at a cost of P 40K, (b) keeping it and upgrading it for a cost of P 200K, and (c) selling it for a price of about P 160K. The company is considering two boat models for its new acquisitions: (a) a model of the same size of the current model it owns, and (b) a bigger model with a capacity of 10 passengers. Relevant pieces of information are as follows:
Option | Capital Expense | Capital Gain | Annual Operating Cost | Annual Gross Revenue | Passenger Capacity | Minimum Order Quantity |
Keep old boat w/ minor repairs | 40 | 220 | 300 | 6 | ||
Keep old boat w/ upgrade | 200 | 150 | 300 | 6 | ||
Sell old boat | 160 | - | ||||
Buy new boat similar to existing boats | 400 | 80 | 300 | 6 | 5 units | |
Buy a new boat with bigger capacity | 800 | 150 | 600 | 10 | 3 units |
Conditions that have to be met include the following:
- Total fleet capacity should be at least 120 passengers;
- New fleet size should be at least 16 boats;
- The number of new boats should at least be 50% of the total new fleet size;
- Minimum order quantity for new small boats is 5 while that for big boats is 3;
- The expected lifetime of the new boats and the old boats, after repairs & upgrades, is 4 years;
- Capital expenses or capital gains are amortized over the expected life of 4 years;
- Annual contribution from each option is computed as Gross revenue plus amortized capital gains less annual operating costs less amortized capital expense;
- Buying one or more of the new boats similar to existing boats would entail the establishment of a new support facility that will require P 500 K/year to maintain;
- Buying one or more of the new boats with bigger capacity would entail the establishment of a new support facility that will require P 800 K/year to maintain;
Formulate an ILP Model that will maximize the annual operating profit from the operations of the fleet. (Note: All monetary values are assumed in thousands already - no need to put "K" in the coefficients.)
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