Question

An appliance company has two warehouses and two retail outlets. Warehouse A has 400 refrigerators and warehouse B has 300 refrigerators. Outlet I needs 200 refrigerators, and outlet II needs 300 refrigerators. It cost $36 to ship a refrigerator from warehouse A to outlet I and $30 to ship a refrigerator from warehouse A to outlet II. It costs $30 to ship a refrigerator from warehouse B to outlet I and $25 to ship a refrigerator from warehouse B to outlet II. How should the company ship the refrigerators to minimize the cost

Answer 1

Answer:

Warehouse B:

• ship 200 refrigerators to outlet 1
• ship 100 refrigerators to outlet 2

Warehouse A:

• ship 200 refrigerators to outlet 2

Explanation:

                      Outlet 1 Outlet 2 Availability

Warehouse A    36             30    400

Warehouse B    30     25    300

Requirements  200          300

You should ship 200 refrigerators from warehouse B to outlet 1, total distribution costs = 200 x $30 = $6,000

You should ship 100 refrigerators from warehouse B to outlet 2, and 200 refrigerators from warehouse A to outlet 2, total distribution costs = (100 x $25) + (200 x $30) = $8,500

total distribution costs = $14,500

The difference in distribution costs from warehouses to outlet 1 is $6, and the difference in distribution costs from warehouses to outlet 2 is $5, so you should send all the refrigerators from warehouse B to outlet 1 to incur in the lowest possible cost.