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The Executive Furnitures Ltd. (EFL) produces a unique type of computer desks. Four of EFL?s main outlets are S1, S2,S3, and S4.These outlets already have requirements in...

      

The Executive Furnitures Ltd. (EFL) produces a unique type of computer desks. Four of
EFL‟s main outlets are S1, S2,S3, and S4.These outlets already have requirements
in excess of the combined capacity of its three production plants P1,P2, and P3. The
company needs to know how to allocate its production capacity to maximize profits.
Distribution costs (in Sh.) per unit from each production plant to each outlet are given in
the following table:
fig1835418.png
Since the four outlets are in different parts of the country and as there are differing
transportation costs between the production plants and the outlets along with slightly
different production costs at different production plants there is a pricing structure which
enables different prices to be charged at the four outlets. Currently, the price per unit
charged is Sh.2,300 at S1, Sh.2,350 at S2, Sh.2,250 at S3, and Sh.2,400 at S4. The variable unit
production costs are Sh.1,500 at plants P1 and P 3 and Sh.1,550 at plant P2. The demand at
S1,S2, S3 and S4 are 850, 640, 380 and 230 desks respectively while the plant capacity at plant
P1, P2 and P3are 625, 825 and 450 desks respectively.
Required:
Using the transportation algorithm, determine the contribution to profit for the optimal
allocation.

  

Answers


Kavungya
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fig2035419.png
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Kavungya answered the question on May 3, 2021 at 13:20


Next: Highlight how the transportation algorithm can be modified for profit maximization rather than minimization of costs.
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