The National National Manufacturing Manufacturing Company (NMC) assemb assembles les electronic equipment. equipment. The demand demand for the equipment equipment is seasonal seasonal and its trend is increasi increasing. ng. The demand demand for the equipment in the past four years is given in Table 1. The demand is captive i.e., henever a month!s demand is not met, the unsatisfied demand is required to be met from the production of the subsequent month. "or every unit that cannot be shipped because of insufficient inventory, NMC pays a penalty of #s. 1$$. % decision to change the production level for the folloing month should be made by the end of the month. "or e&le, if the production prod uction in May is ',$$$ units and if a decision is taen to increase the production level by '$$ units at the end of May, then the production for une is ','$$ units and the cost of increasing increasing is #s. #s. ',*$$+. -f, on the other hand, no change in the production level has been decided, then the production for une is ',$$$ units. The ma&imum ma&imum production produ ction capacity is *,$$$ units per month. The cost of changing the production level is given belo
There ill be shut don in the months of March and 9eptember. -f the production productio n level in %pril is different from the production level in "ebruary, then only the company ill incur a cost in %pri %prill for change in production production level. level. 9imil 9imilarl arly y in the months months of %ugust %ugust and :ctober. 1
0repared by 0rofessor. M.%. ;an
1
The cost of holding equipment in inventory is #s. 1 per month. The opening inventory at the beginning of anuary 158$ is 13$$ units. The inventory level at the end of /ecember 158$ should be '3$$ units. This is due to a government regulation hich stipulates a stoc of one month demand at the end of each calendar year =overnment auditors verify the stoc in the first ee of anuary. -f there is a shortfall, then NMC ill be compelled to place orders ith contractors and pays #s. 1$$ more than their factory cost (i.e., the penalty for falling short of '3$$ units at the end of the year is #s. 1$$ per unit). 2ecause of this regulation NMC paid a heavy penalty in 15>5. The company has decided to maintain a production of '$$$ units in anuary 1581. ?ence, hen the game ends in /ecember 158$, the cost of changing the production level in anuary ill also be taen into account. Table 1 /emand for the @quipment in the 0ast "our Aears Month %NB%#A "@2#B%#A M%#C? %0#- M%A BN@ BA %B=B9T 9@0T@M2@# :CT:2@# N:;@M2@# /@C@M2@# T:T%
