1) Edwards Manufacturing Company purchases two component parts from three different suppliers.

The suppliers have limited capacity, and no one supplier can meet all the companys needs. In addition, the suppliers charge different prices for the components. upplier Component 1 ! " 1 #1! #1" #1$ ! #1% #11 #1% Each supplier has a limited capacity in terms of the total num&er components it can supply. 'owever, as long as Edwards provides sufficient advance orders, each supplier can devote its capacity to component 1, component !, or any com&ination of the two compoents, if the total num&er of units ordered is within its capacity. upplier 1 ! " Capacity (%% 1%%% )%% If the Edwards production plan for the ne*t period includes 1%%% units of component 1 and )%% units of component !, what purchases do you recommend+ That is, how many units of each component should &e ordered from each supplier+ ,hat is the total purchase cost for the components+ !) Two types of crude oil are used to produce two grades of gasoline. The percentage of important ingredients -. and /) in each type of crude oil differs as does the cost per gallon as shown &elow0 Crude oil Cost1gallon Ingredient . Ingredient / 1 #%.1% !%2 (%2 ! #%.13 3%2 "%2 Each gallon of regular gasoline must contain at least $%2 of ., whereas each gallon of high octane can contain at most 3%2 of /. 4aily demand for regular octane gasoline is )%%,%%% gallons and daily demand for high octane is 3%%,%%% gallons. 'ow many gallons of each type of crude oil should &e used in regular and in high octane gasoline in order to satisfy the daily demand at a minimum cost+ ") 5randec Company manufactures, assem&les, and re&uilds material hand e6uipment used in warehouses and distri&ution centers. 7ne product, called a 8iftmaster is assem&led from four components0 a frame, a motor, two supports, and a metal strap. 5randec is planning a production of 3%%% 8iftmasters ne*t month. 5randec purchases the motors from an outside supplier, &ut the frames, supports, and straps may either &e manufactured &y the company or purchased from an outside supplier. Manufacturing and purchase costs per unit are shown.
Component Frame Support Strap Manufacturing Costs #").%% 11.3% (.3% Purchase cost #31.%% 13.%% 9.3%

Three departments are involved in the production of these components. The time -in min per unit) re6uired to process each component in each department is given, along with availa&le capacity -in hours) for the three departments.
Component Frame Support Strap Capacity Cutting Dept ".3 1." %.) "3% Milling Dept !.! 1.9 : $!% Shaping Dept ".1 !.( 1.9 ()%

a. 5ormulate and solve a linear programming model for this ma;e:or:&uy application. 'ow many of each component should &e manufactured and how many should &e purchased+ &. ,hat is the total cost of the manufacturing and purchasing plan+ c. 'ow many hours of production time are used in each department+ d. 'ow much should 5randec &e willing to pay for an additional hour of time in the shaping department+ e. .nother manufacturer has offered to sell frames to 5randec for #$3.%% each. Could 5randec improve its position &y pursuing this opportunity+ ,hy or why not+ $) .dirondac; <aper Mills, Inc., operates paper plants in .ugusta, Maine, and tupper 8a;e, =ew >or;. ,arehouse facilities are located in .l&any, =ew >or;, and <ortsmouth, new 'ampshire. 4istri&utors are located in /oston, =ew >or;, and <hiladelphia. The plant capacities and distri&utor demands for the ne*t month are as follows0 <lant Capacity -units) 4istri&utor 4emand -units) .ugusta "%% /oston 13% Tupper 8a;e 1%% =ew >or; 1%% <hiladelphia 13% The unit transportation costs -in #) for shipments from the two plants o the two warehouses and from the two warehouses to the three distri&utors are as follows0 ,arehouse <lant .l&any <ortsmouth .ugusta 9 3 Tupper 8a;e " $ ,arehouse .l&any <ortsmouth /oston ) 3 4istri&utor =ew >or; 3 ( <hiladelphia 9 1%

a. 5ormulate the .dirondac; <aper Mills pro&lem as a linear programming pro&lem. &. olve the linear program o determine the minimum cost shipping schedule for the pro&lem. 3) The 4ar&y Company manufactures and distri&utes meter used to measure electric power consumption. The company started with a small production plant in El <aso and gradually &uilt a customer &ase throughout Te*as. . distri&ution center was esta&lished in 5t. ,orth, Te*as later, as &usiness e*panded to the north? a second distri&ution center was esta&lished in anta 5e, =ew Me*ico. The El <aso plant was e*panded when the company &egan mar;eting its meters in .ri@ona, California, =evada, and Atah. ,ith the growth of the ,est Coast &usiness, the 4ar&y Company opened a third distri&ution center in 8as Begas and Cust two years ago opened a second production plant in an /ernardino, California. Manufacturing costs differ &etween the companyDs production plants. The cost of each meter produced at the El <aso plant is #1%.3%. The an /ernardino plant utili@es newer and more efficient? as a result, manufacturing costs are #.3% per meter less than at the El <aso plant. The companyEDs rapid growth meant that not much attention was paid to the efficiency of the distri&ution system. 4ar&yEDs management decided it is now time to address this issue. The cost of shipping a meter from each of the two plants to each of the three distri&ution centers is shown in Ta&le 1 &elow. The 6uarterly production capacity is "%,%%% meters at the older El <aso plant and !%,%%% meters at the an /ernardino plant. =ote that no shipments are allowed from the an /ernardino plant to the 5t. ,orth distri&ution center. The

company serves nine customer @ones from the three distri&ution centers. The forecast of the num&er of meters needed in each customer @one for the ne*t 6uarter is shown in Ta&le !.The cost per unit of shipping from each distri&ution center to each customer @one is given in Ta&le ". =ote that some of the distri&ution centers cannot serve certain customer @ones. In the current distri&ution system, demand at the 4allas, an .ntonio, ,ichita, and Fansas City customer @ones is satisfied &y shipments from the 5t. ,orth distri&ution center. In a similar manner, the 4enver, alt 8a;e City, and <hoeni* customer @ones are served &y the anta 5e distri&ution, and the 8os .ngeles and an 4iego customer @ones are served &y the 8as Begas distri&ution center. To determine how many units to ship from each plant, the 6uarterly customer demand forecasts are aggregated at the distri&ution centers. .nd a transportation model is used to minimi@e the cost of shipping from the production plants to the distri&ution centers. Ta&le 1 hipping cost per unit from production plants to distri&ution centers -#) 4istri&ution Center <lant 5t ,orth anta 5e 8as Begas El <aso ".!% !.!% $.!% an /ernardino ::: ".G% 1.!% Ta&le ! Huarterly 4emand 5orecast Customer Ione 4emand -meters) 4allas ("%% an .ntonio $))% ,ichita !1"% Fansas City 1!1% 4enver (1!% alt 8a;e City $)"% <hoeni* !93% 8os .ngeles )3)% an 4iego $$(% Ta&le " hipping cost from the distri&ution centers to the customer @ones -#) Customer Ione
4allas 5t ,orth %." ante 5e 3.! 8as Begas : an .ntonio !.1 3.$ : ,ichita ".1 $.3 : Fansas City $.$ (.% : 4enver (.% !.9 3.$ alt 8a;e City :: $.9 "." <hoeni* :: ".$ !.$ 8. :: "." !.1 4 :: !.9 !.3

Huestion for overall pro&lem a. If the company does not change its current distri&ution strategy, what will its manufacturing and distri&ution costs &e for the following 6uarter+ &. uppose that the company is willing to consider dropping the distri&ution center limitations? that is, customer could &e served &y any of the distri&ution centers for which costs are availa&le.

Can costs &e reduced+ /y how much+ c. The company wants to e*plore the possi&ility of satisfying some of the customer demand directly from the production plants. In particular, the shipping cost is #."% per unit from an /ernardino to 8os .ngeles and #.9% from an /ernardino to an 4iego. The cost for direct shipments from El <aso to an .ntonio is #".3% per unit. Can distri&ution costs &e further reduced &y considering these direct plant customer shipments+ d. 7ver the ne*t five years. 4ar&y is anticipating moderate growth -3%%% meters) to the =orth and ,est. ,ould you recommend that they consider plant e*pansion at this time+ () The 5lamingo Jrill is an upscale restaurant located in t. <eters&urg, 5lorida. To help plan an advertising campaign for the coming season, 5lamingoDs management team hired the advertising firm of 'as;ell K Lohnson -'L). The management team re6uested 'LDs recommendation concerning how the advertising &udget should &e distri&uted across television, radio, and newspaper advertisements. The &udget has &een set at #!9G,%%%. In a meeting with 5lamingoDs management team, 'L consultants provided the following information a&out the industry e*posure effectiveness rating per ad, their estimate of the num&er of potential new customers reached per ad, and the cost for each ad.
Advertising Media Television Madio =ewspaper Exposure Rating / Ad G% !3 1% e! Customers / Ad $%%% !%%% 1%%% Cost / Ad #1%,%%% # ",%%% # 1,%%%

The e*posure rating is viewed as a measure of the value of the ad to &oth e*isting customers and potential new customers. It is a function of such things as image, message recall, visual and audio appeal, and so on. .s e*pected, the more e*pensive television advertisement has the highest e*posure effectiveness rating along with the greatest potential for reaching new customers. .t this point, the 'L consultants pointed out that the data concerning e*posure and reach were only applica&le to the first few ads in each media. 5or television, 'L stated that the e*posure rating of G% and the $%%% new customers reached per ad were relia&le for the first 1% television ads. .fter 1% ads, the &enefit is e*pected to decline. 5or planning purposes, 'L recommended reducing the e*posure rating to 33 and the estimate of the potential new customers reached to 13%% for any television ads &eyond 1%. 5or radio ads, the preceding data are relia&le up to a ma*imum of 13 ads. /eyond 13 ads, the e*posure rating declines to !% and num&er of new customers reached declines to 1!%% per ad. 5or newspaper ads, the preceding data are relia&le up to a ma*imum of !%? the e*posure rating declines to 3 and the potential num&er of new customers reached declines to )%% for additional ads.

5lamingoDs management team accepted ma*imi@ing the total e*posure rating, across all media, as the o&Cective of the advertising campaign. /ecause of managementDs concern with attracting new customers, management stated that the advertising campaign must reach at least 1%%,%%% new customers. To &alance the advertising campaign and ma;e use of all advertising media, 5lamingoDs management team also adopted the following guidelines.

Ase at least twice as many radio advertisements as television advertisements. Ase no more than !% television advertisements. The television &udget should &e at least #1$%,%%%. The radio advertising &udget is restricted to a ma*imum of #GG,%%%. The newspaper &udget is to &e at least #"%,%%%.

'L agreed to wor; with these guidelines and provide a recommendation as to how the #!9G,%%% advertising &udget should &e allocated among television, radio, and newspaper advertising. Managerial Report 4evelop a model that can &e used to determine the advertising &udget allocation for the 5lamingo Jrill. Include a discussion of the following in your report. 1. . schedule showing the recommended num&er of television, radio, and newspaper advertisements and the &udget allocation for each media. how the total e*posure and indicate the total num&er of potential new customers reached. !. 'ow would the total e*posure change if an additional #1%,%%% were added to the advertising &udget+ ". . discussion of the ranges for the o&Cective function coefficients. ,hat do the ranges indicate a&out how sensitive the recommended solution is to 'LDs e*posure rating coefficients+ $. .fter reviewing 'LDs recommendation, the 5lamingoDs management team as;ed how the recommendation would change if the o&Cective of the advertising campaign was to ma*imi@e the num&er of potential new customers reached. 4evelop the media schedule under this o&Cective. 3. Compare the recommendations from parts 1 and $. ,hat is your recommendation for the 5lamingo JrillDs advertising campaign+