In the next six months a company must, in each month, operate either a normal shift or an extended shift (if it produces at all). A normal shift costs 100,000 per month and can produce up to 5,000 units per month. An extended shift costs 180,000 per month and can produce up to 7,500 units per month.

It is estimated that changing from a normal shift in one month to an extended shift in the next month costs an extra £15,000. No extra cost is incurred in changing from an extended shift in one month to a normal shift in the next month.

Carrying cost is estimated to be 2 per unit per month (based on the stock held at the end of each month) and the initial stock is 3,000 units (produced by a normal shift). At the end of month 6, at least 2000 units should be in stock. The demand for the company's product is shown below:

Month 1 2 3 4 5 6

Demand 6,000 6,500 7,500 7,000 6,000 6,000

IF the company produces anything in a particular month it must produce at least 2,000 units.

Answer rating: 100% (QA)

Decision Variables Nj production in the normal shift for the jth month Oj production in the extended ... View the full answer