A Company Supplies Goods to Three Customers, Each of Whom

question 49

Essay

A company supplies goods to three customers, each of whom requires 50 units. The company has two warehouses. In Warehouse 1, 75 units are available, and in Warehouse 2, 55 units are available. The costs of shipping one unit from each warehouse to each customer are shown in the table below. There is a penalty for each unsatisfied customer unit of demand - with customer 1, a penalty cost of $100 is incurred; with customer 2, $90; and with customer 3, $115.
-Suppose that the company can purchase and ship extra units to either warehouse for a total cost of $125 per unit and that all customer demand must be met. Determine how to minimize the sum of purchasing and shipping costs.

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Definitions:

Raw Materials

Basic materials and substances used in the initial stages of the production process.

Purchased

A term referring to items or services acquired by a company or individual, typically in exchange for money.

Finished Goods Inventory

Represents products that have completed the manufacturing process but have not yet been sold to customers.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.