Determine how to minimize the net cost incurred

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Reference no: EM132219099

A customer requires during the next 4 months, respectively, 50, 65, 100, and 70 units of a commodity, and no backlogging is allowed (that is, the customer’s demand requirements must be met on time). Initial inventory is 20 units. Production costs are $5, $6, $4, and $7 per unit during these months. The storage cost from one month to the next is $2 per unit (assessed on ending inventory). It is estimated that each unit on hand in inventory at the end of month 4 could be sold for $6. Determine how to minimize the net cost incurred in meeting the demands for the next 4 months.

Starting with the optimal solution above, use SolverTable to see what happens to the decision variables and the total cost when the initial inventory varies from 0 to 100 in 20-unit increments. How much lower would the total cost be if the company started with 40 units in inventory, rather than 20? Would this same cost decrease occur for every 20-unit increase in initial inventory?

Reference no: EM132219099

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