1. Woodstock Appliance Company
The Woodstock Appliance Company carries four products. The annual demands for these products range from 300/year for a high-end vacuum cleaner to 30,000/year for a table fan. The order cost, holding cost, and purchase cost are known for each of the four products as well as how much space each product occupies. The numerical information is summarized in the following table.
|
Product 1 |
Product 2 |
Product 3 |
Product 4 |
|
|
Demand |
5000 |
10000 |
30000 |
300 |
|
Fixed
cost |
400 |
700 |
100 |
250 |
|
Holding
cost |
10% |
10% |
10% |
10% |
|
Purchase
cost |
500 |
250 |
80 |
1000 |
|
Space |
12 |
25 |
5 |
20 |
Woodstock stores inventory in its warehouse, which contains 12,000 square feet that can be dedicated to any combination of the four products. Note that this is the maximum available space (not average).
What are the order quantities that minimize cost while respecting the limit on storage space?
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