Letherin Hides is a company that makes boots specifically targeting college students. Forecasts of sales for the next year are 200 in the summer, 450 in the autumn, and 500 in the winter. Accessories that are used 

on the boots are purchased from a supplier for $31.66. The cost of capital is estimated to be 24% per year (or 6% per quarter); thus, the holding cost per item is 0.06($31.66) = $1.9 per quarter (rounded figure). 

Letherin Hides hires freelance art designers at part-time to craft designs during the summer, and they earn $6 per hour. In the autumn, labor is more difficult to keep, and the owner must pay $6.5 per hour to 

retain qualified help. Because of the high demand for part-time help during the winter holiday season, labor rates are higher in the winter, and workers earn $7.75 per hour. Each boot design takes 2 hours to 

complete. How should production be planned over the three quarters to minimize the combined production and inventory holding costs?

 

The table below provides information on Letherin Hides boot design cost and production.

Letherin Hides Data Summer Autumn Winter Unit Production Cost121315.5Unit Inventory Holding Cost1.91.91.9Demand200450500

Use a linear optimization model based on the data to answer the following questions.

According to the linear optimization model, what is the total cost incurred by Letherin Hides for the combined seasons?

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We can set up a linear optimization model to minimize the total cost of production and inventory hol... View the full answer