Please help with this problem... Orange Inc. does not manufacture any of its pro
ID: 344466 • Letter: P
Question
Please help with this problem...
Orange Inc. does not manufacture any of its products. They handle the research and development and the design of their uPhones and then outsource their production to three companies (1) Wolfcon, (2) Simson and (3) Galax. The demand for the next six months is given in the table below.
1
2
3
4
5
6
Demand in thousands
3.000
6,000
9,000
7,000
4,000
2,000
Orange Inc. has to work with all three companies to meet the demand. The costs for producing the uPhone is given in the table below
Company
Startup Cost
Cost per Month
Max. Capacity
Wolfcon
$2,000,000
$1,000,000 + 200 per unit
3,000
Simson
$3,000,000
$2,000,000 + 100 per unit
4,000
Galax
$4,000,000
%500,000 + 300 per unit
3,000
To start production in any of the companies the startup cost must be paid upfront. After the start up cost is paid, the company can continue to produce indefinitely without charging the startup cost again. However, if they are asked to stop producing for a month, the startup cost must be paid again to get it back up and running. There is also a fixed cost for every month and a variable cost. Therefore, Wolfcon has a fixed cost of $1 million every month and a variable cost of $200 per unit. If Orange Inc. has already paid the startup cost last month, they could choose to pay the fixed cost to a company and not place an order in order to avoid paying the startup cost again. Formulate as LP, setup and solve the problem in Excel. Please clearly specify your decision variables and define them properly. (Answer $26,300,000)
Please supply math model.e.g., min or max, ST constraints and variables
1
2
3
4
5
6
Demand in thousands
3.000
6,000
9,000
7,000
4,000
2,000
Explanation / Answer
This chart gives the production cost idea of three companies.
Now, we can select from this table, as per our per month requirement keeping in mind the minimum expense.
- Production to be started in each of the company as per requirement.Important Factors:
- If we are required to use simson, then use it max to achieve economy of scale as it has least variable cost, otherwise try not to use it as its fixed cost is high.
- Use galax for small if requirement is less.
Company Start up cost Max Capacity Site Fixed Cost Per Month Variable Cost per Unit No. of units produced No. of units produced No. of units produced No. of units produced 1000 2000 3000 4000 Wolfcon $2,000,000 3000 1 $1,000,000 $200 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Simson $3,000,000 4000 2 $2,000,000 $100 $2,100,000 $2,200,000 $2,300,000 $2,400,000 Galax $4,000,000 3000 3 $500,000 $300 $800,000 $1,100,000 $1,400,000 $1,700,000