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Hansen Controls has been awarded a contract for a large number of control panels. To meet this demand, it will use its existing plants in San Diego and Houston, and consider new plants in Tulsa, St. Louis, and Portland. Finished control panels are to be shipped to Seattle, Denver, and Kansas City. Pertinent information is given in the table.
Develop a model whose solution would reveal which plants to build and the optimal shipping schedule.
Marginal Cost
The extra cost resulting from the manufacture of an additional unit of a product or service.
Average Fixed Cost
The total fixed costs of production divided by the quantity of output produced, indicating how fixed costs dilute with increased production.
AFC Curve
The Average Fixed Cost curve, depicting how the fixed costs of production spread over different quantities of output affect the total cost per unit.
MC Curve
The Marginal Cost curve, representing the increase in total cost incurred from producing one additional unit of a good or service.
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