Hoosier Power needs to determine a capacity expansion plan to meet Bloomington’s power needs for the next 20 years. The current capacity is 5,000 kWh. The demand for the current year is 4,000 kWh, and demand is expected to increase by 1,000 kWh in each succeeding year. At the beginning of each year, Hoosier Power must determine the amount of capacity to add, given the following inputs: Any year in which capacity is added, a fixed cost of $120,000 is incurred plus a cost of $120 per kWh of capacity; At most 10,000 kwh of capacity can be added in a single year; It costs $24 per year to maintain a unit of capacity; It costs $12 per year to produce one kWh;
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
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Hoosier Power needs to determine a capacity expansion plan to meet Bloomington’s power needs for the next 20 years. The current capacity is 5,000 kWh. The demand for the current year is 4,000 kWh, and demand is expected to increase by 1,000 kWh in each succeeding year. At the beginning of each year, Hoosier Power must determine the amount of capacity to add, given the following inputs:
- Any year in which capacity is added, a fixed cost of $120,000 is incurred plus a cost of $120 per kWh of capacity;
- At most 10,000 kwh of capacity can be added in a single year;
- It costs $24 per year to maintain a unit of capacity;
- It costs $12 per year to produce one kWh;
- If production does not meet demand, a shortage cost of $75 per kWh short is incurred.
Hoosier Power wants to determine a capacity expansion plan with the minimal total cost to meet Bloomington’s power needs for the next 20 years.
- Define the decision variables and write down the detailed mathematical formulation of Hoosier Power’s optimization problem.
b. Solve the optimization problem by Excel Solver. Write down the optimal capacity expansion plan and total cost for the next 20 years.
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