QUESTION ONE (10MARKS)

Multel Ltd. had decided to launch an addition to its product range. The new product may be distributed through any combination of the two company warehouses W1 and W2.The available annual production capacities for the new product are:

1000 units at plant P1 2000 units at plant P2 1000 units at plant P3

The three major concentrations of customer demand are at locations D1, D2 and D3 which are estimated to require each year:

900 units at D1 800 units at D2 900 units at D3

The unit production costs amount to Ksh 30, Ksh 40, Ksh 10 at P1, P2 and P3 respectively.

The unit handling costs at the warehouses amount to Ksh 20 and Ksh 20 at W1 and W2 respectively. The unit transportation costs in ksh. from plant to warehouse and from warehouse to customer are as follows:

	W1	W2		D1	D2	D3
P1	60	60	W1	30	50	80
P2	50	50	W2	50	30	90
P3	130	40

Required: Using VAM, determine the optimum production anddistribution schedule.

QUESTION TWO (10MARKS)

A company manufactures 30 units per day. The sale of these items depends upon demand which has the following distribution

Sales	Probability
27	0.10
28	0.15
29	0.20
30	0.35
31	0.15
32	0.05

The production cost and sale price of each unit are sh 40 and sh 50, respectively. Any unsold product is to be disposed off at a loss of sh 15 per unit. There is a penalty of sh 5 per unit if the demand is not met.

1. Using the following random numbers, estimate the total profit/loss for the company for the next ten days

10, 99, 65, 99, 95, 01, 79, 11, 16, 20

1. If the company decides to produce 29 units per day .what is the advantage anddisadvantageof thecompany