Assignment 1

2205 Words Jun 21st, 2009 9 Pages
Question 5-4
**Refer to excel sheet Question 5-4 for all the calculations according to the respective question parts.
This is a cost minimization problem, thus the target is to achieve the lowest cost possible. The constraints in all parts of a, b, c, and d are the same. We had to ensure that the unused capacity unit was a positive number and the unmet demand must remain at zero. For parts C and D, an additional constraint and an assumption were made; the assumption is that per-merger scaling back and shutdown are possible. The additional constraint of “only one choice” can be determined from the 3 plant operation options: keep current capacity, scale back capacity, or shut down the plant. In Part D, there is no duty fee charge.
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Sleekfon
With the scaled back or shutdown option in effect for the plants, Sleekfon has no scale back plants; however, the North American facility will be shutdown. Thus only the European and South American facilities will remain in operation. The European market will have 20 million units provided by the European facility. The South American plant will provide 1.98 million units to North American market, 5 million units to South American market, and 3.01 million to Japanese market.
Sturdyfon
No scale back or shutdown affected Sturdyfon. Their European plant will serve 20 thousand units to the North American market, 4 million units to the European market, 11 million units to the market in non-European countries, 990 thousand units to the Japanese market, and 2 million to the African market; with 2 million units left in storage at the facility. The North American market will be served by the North American facility. Finally, the market in Japan and the Rest of Asia and Australia will each have 5 million units provided to them by the facility in the rest of Asia.
Part D
When the duty fees were reduced to zero, the lowest achievable cost for production and distribution network became $956.3 million, which is reduced by $62.64 million; with a lowered variable cost of $526.3 million and fixed cost remained the same. The following changes were in effect when duty-free is available:
Sleekfon
All facilities remained in operation. The

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