ProBLEM STATEMENT
Sailco Corporation must determine how many sailboats should be produced during each of the next four quarters (one quarter = three months). The demand during each of the next four quarters is as follows: first quarter, 40 sailboats; second quarter, 60 sailboats; third quarter, 75 sailboats; fourth quarter, 25 sailboats. Sailco must meet demands on time. At the beginning of the first quarter, Sailco has an inventory of 10 sailboats. At the beginning of each quarter, Sailco must decide how many sailboats should be produced during that quarter. For simplicity, we assume that sailboats manufactured during a quarter can be used to meet demand for that quarter. During each quarter, Sailco can produce up to 40 sailboats with regular-time labour at a total cost of $400 per sailboat. By having employees work overtime during a quarter, Sailco can produce additional sailboats with overtime labor. Overtime labour is split into two categories: the total cost for the first 10 sailboats produced on overtime is $450 per sailboat; the next 10 sailboats cost $500 per sailboat. A maximum of 60 sailboats can be produced per quarter. Sailco is capable of selling each sailboat demanded during each quarter at $500 per sailboat.
At the end of each quarter (after production has occurred and the current quarter’s demand has been satisfied), a carrying or holding cost of $20 per sailboat is incurred.
View the Complete Problem Formulation here View the Original Problem Statement here
At the end of each quarter (after production has occurred and the current quarter’s demand has been satisfied), a carrying or holding cost of $20 per sailboat is incurred.
View the Complete Problem Formulation here View the Original Problem Statement here