Krappy Kraft Beer Inc. has two breweries in BC, with monthly capacities and production costs as follows:
Question:
Krappy Kraft Beer Inc. has two breweries in BC, with monthly capacities and production costs as follows:
| Brewery | Capacity/month | Cost per six-pack |
| 1 | 10000 six-packs | $1.60 |
| 2 | 9500 six-packs | $1.80 |
The product is channeled through 4 different distributors. Bart’s Beer is so popular that all stock that can be brewed is quickly purchased by the distributors, but the distributors can only handle a certain amount of product per month. Also, each distributor is willing to pay a different amount per six-pack to Bart:
| Distributor | Capacity/month | Price per six-pack |
| A | 8500 | $10.75 |
| B | 4500 | $9.95 |
| C | 5500 | $11.00 |
| D | 6500 | $10.50 |
Bart’s Beer Inc. has to pay the cost of shipping to the 4 distributors. The shipping cost per six-pack from the breweries to distributors is as follows:
| Brewery | A | B | C | D |
| 1 | $1.00 | $1.15 | $1.85 | $2.00 |
| 2 | $0.65 | $.75 | $1.50 | $1.75 |
Formulate an LP model that will enable Bart’s Beer to maximize its profits each month.
Complete the following
a) Develop the Transportation Network.
b) Formulate the problem into proper LP format
c) Use Solver to determine the optimal solution. State the optimal solution in the context of the business problem.
d) Generate an “answer report” and “sensitivity report” from Solver and answer the following questions
i. Interpret the meaning of the shadow price for the monthly production capacity limitation of Brewery #2.
ii. Interpret the meaning of the reduced cost for shipping six-packs from Brewery 1 to Distributor D.
Expert Answer:
Accounting Tools for business decision making
ISBN: 978-0470095461
4th Edition
Authors: kimmel, weygandt, kieso
