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An automobile manufacturer has five outdated plants: one each in Michigan, Ohio, and California and two in New York. Management is considering modernizing these plants to manufacture engine blocks and transmissions for a new model car. The costs to modernize each plant and the manufacturing capacity after modernization are as follows:
Plant
Cost [$ millions]
Engine Blocks [1000s]
Transmissions [1000s]
Michigan
25
500
300
New York
35
800
400
Ohio
40
900
600
California
20
200
The projected needs are for total capacities of 900,000 engine blocks and 900,000 transmissions. Management wants to determine which plants to modernize to meet projected manufacturing needs and, at the same time, minimize the total cost of modernization.
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