DryIce, Inc., is a manufacturer of air conditioners that has seen its demand grow significantly. The company anticipates nationwide demand for the next year to be 180,000 units in the South, 120,000 units in the Midwest, 110,000 units in the East, and 100,000 units in the West. Managers at DryIce are designing the manufacturing network and have selected four potential sites—New York, Atlanta,

Chicago, and San Diego. Plants could have a capacity of either 200,000 or 400,000 units. The annual fixed costs at the four locations are shown in Table 5-5, along with the cost of producing and shipping an air conditioner to each of the four markets. Where should DryIce build its factories and how large should they be?

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Table 5-5 Production and Transport Costs for Drylce, Inc. a. If exchange rates are expected as in Table 5-7, and no plant can run below 50 percent of capacity, how much should each plant produce and which markets should each plant supply? b. If there are no limits on the amount produced in a plant, how much should each plant produce? c. Can adding 10 tons of capacity in any plant reduce costs? d. How should Sunchem account for the fact that exchange rates fluctuate over time?