Exhibit 6-2
Sinclair Plastics Operates Two Chemical Plants Which Produce

question 2

Essay

Exhibit 6-2
Sinclair Plastics operates two chemical plants which produce polyethylene; the Ohio Valley plant which can produce up to 10,000 tons per month and the Lakeview plant which can produce up to 7,000 tons per month. Sinclair sells its polyethylene to three different auto manufacturing plants, Grand Rapids (demand = 3000 tons per month), Blue Ridge (demand = 5000 tons per month), and Sunset (demand = 4000 tons per month). The variable unit cost of shipping a ton is $1 per mile. The number of miles between the respective plants is shown in the table below:
In addition to the variable unit costs of shipping, Sinclair incurs a fixed handling cost (of pickup and delivery) for any shipping routes it uses. These costs are discounted for longer routes, as shown below:
$$\begin{array} { | l | l | l | l | } \hline & \text { Grand Rapids } & \text { Blue Ridge } & \text { Sunset } \\\hline \text { Ohio Valley } & 50 & 40 & 100 \\\hline \text { Lakeview } & 60 & 50 & 75 \\\hline\end{array}$$
$\begin{array}{c}\text { Fixed Cost Levels }\\\begin{array}{lll}\text { Distance (mi)}&\text { Fixed Cost } \\<=25 & \$ 100,000 \\<=50 & \$ 60,000 \\<=75 & \$ 20,000 \\<=100 & \$ 0\end{array}\end{array}$

-Refer to Exhibit 6-2.Suppose the shipping capacity for all routes is 3000 tons per month.What is Sinclair's optimal shipping plan in that case
What is the total cost in that case

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