Here, is the production facilities (3), is the number of
regional markets (7), is the annual demand for cell phones
from regional market , is the potential capacity of each
production facility, is the annualized fixed cost of setting up a
production facility, is the variable production and shipping cost
(including duty) from production facility to demand region ,
and is the number of cell phones from production facility to
demand region .
Note, in the question is it is mentioned that the duties are to
be applied using the formula,
However, if one will use this formula the fixed cost will get
counted twice, first in this formula and second as full fixed cost
(
See objective function equation
).
To overcome this difficulty, one is required separate the unit
cost and the unit cost increase, as shown below:
Also, there will be no import duty if the warehouse the
demand center is located in same country.
First consider the first company and determine the total cost
using the following methodology as shown below:
Step-1: Enter the data in excel exactly as shown below:
