Question

Major Medical, producer of portable EKG units, is developing a 4 month aggregate plan.

	Month 1	Month 2	Month 3	Month 4
Regular Time Capacity	235	255	290	300
OT Capacity	20	24	26	24
Subcontract Capacity	12	15	17	17
DEMAND	255	294	321	301

The cost of producing each unit is $985 on regular time, $1,310 on overtime, and $1,500 on a subcontract. Inventory carrying cost is $100 per month. There is no beginning inventory, and no ending inventory requirement. Backorders are permitted, but cost $400 per month per unit. Find the optimal solution.

What is the optimal cost?                            [ Select ]                       ["$1,114,210", "$1,013,900", "$1,186,810", "$988,860"]      

How much excess capacity is there?                            [ Select ]                       ["1171", "301", "877", "64"]      

In this example, if backlogging were instead not allowed the optimal solution cost would                            [ Select ]                       ["decrease", "increase", "stay the same"]         .

In this example, if backlogging costs were $100 per unit per month instead of $400 the optimal solution cost would

Answer 1

Set up the excel as shown below

The solver parameters are shown below

The result is shown below

The optimal solution is 1187000. Given that we used non-linear program, it is possible for slight deviation. The best answer for optimal solution is 1186810

The total capacity is 1235. The total demand is 1171. This means the unused capacity is 1235-1171 = 64

We are already not using any inventory or backlogging. So if backlogging were not allowed, it would stay the same.

If the backlogging cost were 100 per month it would remain the same