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Determine the optimal production schedule.

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ABC manufacturing company wishes to develop a monthly production schedule for the next three months. Depending upon the sales commitments, the company can either keep the production constant, allowing fluctuations in inventory, or inventories can be maintained at a constant level with fluctuating production. Fluctuating production necessitates in working overtime, the cost of which is estimated to be double the normal production cost of Rs. 12 per unit. Fluctuating inventories result in inventory carrying cost of Rs. 2 per unit per month. If the company fails to fulfill its sales commitment, it incurs a shortage cost of Rs. 4 per unit per month. The production capacities for the next three months are shown below: -

		Production capacity
Month	Regular	Overtime	Sales
1	50	30	60
2	50	0	120
3	60	50	40

Determine the optimal production schedule. -

Mumbai University > MECH > Sem 7 > Operations Research

Marks: 10 M

Year: May 2014

operation research

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Month	1	2	3
Production	50	50	50
Production cost	50×12=600	50×12=600	50×12=600
Sales	60	120	40
Shortage	10	70	-
Shortage cost	10×4=40	70×4=280	-
Inventory	-	-	-
Inventory carrying cost	- …

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