The Arctic Air Company produces residential air conditioners. The manufacturing manager wants to develop a sales and operations plan for the next year based on the following demand and capacity data (in hundreds of product units):

Undertime is unpaid, and no cost is associated with unused overtime or subcontractor capacity. Producing one air conditioning unit on regular time costs $1,000, including $300 for labor. Producing a unit on overtime costs $1,150. A subcontractor can produce a unit to Arctic Air specifications for $1,250. Holding an air conditioner in stock costs $60 for each 2-month period, and 200 air conditioners are currently in stock. The plan calls for 400 units to be in stock at the end of period 6. No backorders are allowed. Use the transportation method to develop a plan that minimizes costs.

Transcribed Image Text:

Jan-Feb (1) Mar-Apr (2) May-Jun (3) Jul-Aug (4) Sep-Oct (5) Nov-Dec (6) Totals Demand Regular-time Capacity Overtime Capacity 50 60 90 120 70 40 430 65 65 65 80 80 65 420 13 13 13 16 16 13 84 Subcontractor Capacity 10 10 10 10 10 10 60