Ad510 Extra Credit Problem Due 10/26/2018
A company is launching a new product. They have four factories to open and four markets they wish to
sell in. They wish to maximize their profit. The cost to ship units from each factory to each market is
provided in the following table:
Cost to ship/unit
A B C D
1 $1.50 $1.20 $1.10 $0.90
2 $1.20 $0.75 $1.20 $1.00
3 $1.40 $1.10 $0.90 $1.00
4 $1.00 $1.10 $0.90 $1.20
The cost to produce out of the factories is split into the fixed cost to run the factory each year, and the
variable cost to produce one unit. They are given below, along with the maximum number of units they
can produce in a year:
Factory Fixed Cost/yr Var Cost/unit Max units/yr
1 $130,000 $10 34000
2 $150,000 $9 20000
3 $145,000 $9 23000
4 $190,000 $7 25000
They charge different prices per unit depending on the market they’re selling in. They also know the
yearly demand in each market, as shown in the table below:
Market A B C D
Revenue/unit $51 $48 $47 $45 Market Demand 32000 18000 10000 7500
Use linear programming in solver to determine their optimal strategy, including
a) Which factories to open
b) How many units to ship from each factory to each market
c) What their total profit would be, assuming no additional costs
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