Problem 8S-2 A toy manufacturer wants to open a third warehouse that will supply

Question

Problem 8S-2 A toy manufacturer wants to open a third warehouse that will supply three retail outlets. The new warehouse will supply 500 units of backyard playsets per week. Two locations are being studied, N1 and N2. Transportation costs for location N1 to stores A, B, and C are $6, $8, and $7 per unit, respectively; for location N2, the costs are $10, $6, and $4, respectively. The existing system is shown in the following table. Which location would result in the lower transportation costs for the system? (Omit the "$" sign in your response.) Store Capacity C (Units/week) To: AB From:837 500 Warehouse 400 Demand (Units/week) 40060 350 Transportation cost Location N1 N2 Thus, location N2 3results in the lower transportation costs.

Explanation / Answer

Transportation cost for A (400 units)

=> N1 = $6/unit x 400 unit = $2400

Transportation cost for B (600units)

=> N1 = $8/unit x 200 unit = $1600

=> N2 = $6/unit x 400 unit = $2400

Transportation cost for C (350 units)

=> N2 = $4/unit x 350 unit = $1400

Transportation cost for N1

=> Retail A = 6 x 400 = $2400

=> Retail B = 8 x 100 = $800

=> Retail C = Nil

ransportation cost for N2

=> Retail A = Nil

=> Retail B = 6 x 400 = $2400

=> Retail C = Nil

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