Operations Management
Operations Management
11th Edition
ISBN: 9780132921145
Author: Jay Heizer
Publisher: PEARSON
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Chapter 13, Problem 2CS
Summary Introduction

Case summary:

Company AC is a distributor and producer of outdoor lighting fixtures. It operates three different plants to produce outdoor lighting fixtures and has five distribution centers. The capacity of distribution centers is as follows:

Warehouse Capacity (units)
Warehouse 1 9,000
Warehouse 2 13,000
Warehouse 3 11,000
Warehouse 4 15,000
Warehouse 5 8,000

Capacity of the three plants is given as follows:

Plants Capacity (units)
Plant 1, regular time 27,000
Plant 1, overtime 7,000
Plant 2, regular time 20,000
Plant 2, overtime 5,000
Plant 3, regular time 25,000
Plant 3, overtime 6,000

Variable cost and fixed cost of each plant are given as follows:

Plant Variable cost per unit Fixed cost per unit
Operating Not operating
Plant 1, regular time $2.80 $14,000 $6,000
Plant 1, overtime $3.52
Plant 2, regular time $2.78 $12,000 $5,000
Plant 2, overtime $3.48
Plant 3, regular time $2.72 $15,000 $7,500
Plant 3, overtime $3.42

Distribution cost per unit is given as follows:

From plants Warehouse 1 Warehouse 2 Warehouse 3 Warehouse 4 Warehouse 5
Plant 1 $0.50 $0.44 $0.49 $0.46 $0.56
Plant 2 $0.40 $0.52 $0.50 $0.56 $0.57
Plant 3 $0.56 $0.53 $0.51 $0.54 $0.35

To determine: The implications of closing a plant.

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