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A distributor of industrial chemicals with demand in six major cities is in the

ID: 444407 • Letter: A

Question

A distributor of industrial chemicals with demand in six major cities is in the process of setting up several manufacturing plants. It has five potential locations to choose from. The final choice of plant locations will be based on three factors: the monthly operating cost and capacities, which vary from location to location, and also the shipping costs to the demand cities. This information is summarized in the tables below.

Monthly

Monthly

Fixed

Capacity

Cost

in Tons

Location 1

$7,500

18

Location 2

$3,500

24

Location 3

$5,000

27

Location 4

$4,000

22

Location 5

$3,000

31

Shipping costs per ton between the proposed plant locations and demand cities

Location 1

Location 2

Location 3

Location 4

Location 5

MonthlyDemand

City 1

1600

1500

2000

400

900

10

City 2

400

1900

2400

1400

1600

8

City 3

700

1000

1400

500

700

12

City 4

1600

100

500

1000

500

6

City 5

1200

500

900

700

300

8

City 6

2800

1200

800

2300

1800

11

Find the locations where the plants should be opened so as to minimize monthly operating costs while meeting customer demand.

Monthly

Monthly

Fixed

Capacity

Cost

in Tons

Location 1

$7,500

18

Location 2

$3,500

24

Location 3

$5,000

27

Location 4

$4,000

22

Location 5

$3,000

31

Explanation / Answer

Location 5th has lower operating cost and It is meetin.g customer demand. After demand, Its capacity is higher. We got operating cost for five locations like total of location1(Sum of vertical line or shipping cost + fixed cost vertically) or sum of shipping cost and fixed cost for example .7500(Fixed cost+ 8300( shipping costor total of 1 city to 6 city=15800 and its capacity after deducting demandis 8, 3500+6200=9700, capacity after deducting demand is 16 capacity, 8000+5000=13000 , its capacity is 15, 6300+4000=10300 and its capacity is 14, 5800+3000=8800 and capacity after deducting demand drom capacity, its new capacity is 20. So location 5th has minimum operating cost and its capacity after deducting demand is 20 .

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