Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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HAL Ltd. produces a line of high-capacity disk drives for mainframe computers.
The housings for the drives are produced in Hamilton, Ontario, and shipped to
the main plant in Toronto. HAL uses the drive housings at a fairly steady rate of 720
per year. Suppose that the housings are shipped in trucks that can hold 40 housings
at one time. It is estimated that the fixed cost of loading the housings onto the truck
and unloading them on the other end is $300 for shipments of 120 or fewer housings
(i.e., three or fewer truckloads). Each trip made by a single truck costs the company
$160 in driver time, gasoline, oil, insurance, and wear and tear on the truck.
a. Compute the annual costs of transportation and loading and unloading
the housings for the following policies: (1) shipping one truck per week,
(2) shipping one full truckload as often as needed, and (3) shipping three full
truckloads as often as needed.
b. For what reasons might the policy in part (a) with the highest annual cost be
more desirable from a systems point of view than the policy having the lowest
annual cost?
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