We’re Computers sells PCs to colleges on the East Cost and ships them from three distribution centers (DCs). The firm is able to supply the following numbers of PCs to the colleges by the beginning of the academic year. Distribution Centers Supply (PCs) 1. Richmond 420 2. Atlanta 610 3. Washington, DC 340 Total 1,370 Four colleges have ordered PCs that must be delivered and installed. Colleges Demand (PCs) A. Tech 520 B. A & M 250 C. State 400 D. Central 380 Total 1,550 The shipping and installation costs per PC from each distributor to each college are as follows: To (cost) From A B C D 1 $22 $17 $30 $18 2 15 35 20 25 3 28 21 16 14 a. Formulate the problem and solve by using Excel Solver. That is how many computers from each DC will be shipped to each college and what will be the total cost? b. To better meet demand at the four colleges it supplies, the company is considering two alternatives: (1) expand Richmond DC to a capacity of 600, at a cost equivalent to an additional $6 in handling and shipping per unit; or (2) purchase a new DC in Charlotte that can supply 300 units with shipping costs of $19 to Tech, $26 to A & M, $22 to State, and $16 to Central. Which alternative should management select, based solely on transportation costs? c. We’re Computers has determined that when it is unable to meet the demand for PCs at the colleges it supplies, the colleges tend to purchase PCs elsewhere in the future. Thus, the firm has estimated a shortage cost for each PC demanded but not supplied that reflects the loss of future sales and goodwill. These costs for each college are as follows: College Cost/PC A. Tech $40 B. A & M 65 C. State 25 D. Central 50

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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We’re Computers sells PCs to colleges on the East Cost and ships them from three
distribution centers (DCs). The firm is able to supply the following numbers of PCs to the
colleges by the beginning of the academic year.
Distribution
Centers
Supply
(PCs)
1. Richmond 420
2. Atlanta 610
3. Washington, DC 340
Total 1,370
Four colleges have ordered PCs that must be delivered and installed.
Colleges Demand
(PCs)
A. Tech 520
B. A & M 250
C. State 400
D. Central 380
Total 1,550
The shipping and installation costs per PC from each distributor to each college are as follows:
To (cost)
From A B C D
1 $22 $17 $30 $18
2 15 35 20 25
3 28 21 16 14
a. Formulate the problem and solve by using Excel Solver. That is how many computers from
each DC will be shipped to each college and what will be the total cost?
b. To better meet demand at the four colleges it supplies, the company is considering two
alternatives: (1) expand Richmond DC to a capacity of 600, at a cost equivalent to an
additional $6 in handling and shipping per unit; or (2) purchase a new DC in Charlotte that
can supply 300 units with shipping costs of $19 to Tech, $26 to A & M, $22 to State, and $16
to Central. Which alternative should management select, based solely on transportation
costs?
c. We’re Computers has determined that when it is unable to meet the demand for PCs at the
colleges it supplies, the colleges tend to purchase PCs elsewhere in the future. Thus, the firm has estimated a shortage cost for each PC demanded but not supplied that reflects the

loss of future sales and goodwill. These costs for each college are as follows:
College Cost/PC
A. Tech $40
B. A & M 65
C. State 25
D. Central 50

Solve part (a) with these shortage costs included. Compute the total transportation cost and
the total shortage cost. (Hint: Consider shortage as the 4th DC)