Haifa Instruments, an Israeli producer of portable kidney dialysis units and other medical products, develops an 8-month aggregate plan. Demand and capacity (in units) are forecast as shown in the table below. The cost of producing each dialysis unit is $1,000 on regular time, $1,300 on overtime, and $1,500 on a subcontract. Inventory carrying cost is $100 per unit per month. There is no beginning or ending inventory in stock.

(a) Set up a production plan, using the transportation model that minimizes cost. What is this plan's cost?
(b) Through better planning, regular time production can be set at exactly the same value, 275 per month. Does this alter the solution?
(c) If overtime costs rise from $1,300 to $1,400, does this change your answer to part (a)? What if they fall to $1,200?

Transcribed Image Text:

CAPACITY SOURCE JAN FEB. MAR. APR. MAY JUNE JULY AUG Regular time 235 255 290300 30 290300 290 30 20 345 340 Overtime 20 26 30 17 330 28 19 320 12 15 17 19 Demand 255 294 321 301