Assignment 1

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Question 5-4
**Refer to excel sheet Question 5-4 for all the calculations according to the respective question parts. This is a cost minimization problem, thus the target is to achieve the lowest cost possible. The constraints in all parts of a, b, c, and d are the same. We had to ensure that the unused capacity unit was a positive number and the unmet demand must remain at zero. For parts C and D, an additional constraint and an assumption were made; the assumption is that per-merger scaling back and shutdown are possible. The additional constraint of “only one choice” can be determined from the 3 plant operation options: keep current capacity, scale back capacity, or shut down the plant. In Part D, there is no duty fee charge.

Part A
Sleekfon has three production facilities in Europe, North America and South America. Their lowest achievable cost for the production and distribution network prior to the merger is $564.39 million per year; with $260 million per year for fixed cost and $304.39 million for variable costs and import duty fees. The European market will be provided with 20 million units per year by the European facility. The facility in North America will provide to the following market: 10 million units per year to the North American market, 3 million units per year to the non-European market in Europe, 2 million units per year to the market in Japan, 1 million units per year to the African market, and 2 million units per year to the markets in rest of Asia and Australia. There will be 2 million units unused capacity at the North American facility each year. Finally, the South American facility will only provide to its own market with 4 million units and 6 million unused units each year. Sturdyfon has three production facilities in Europe, North America and Rest of Asia. Their lowest achievable production and distribution network cost prior to the merger is $512.68 million per year; with $250 million per year for fixed cost and $262.68 million for variable costs and import duty fees. Their European facility will provide for the European and non-European countries in Europe, and Africa annually with 4 million units, 8 million units, and 7 million units, respectively. Each year, 7 million units will remain unused. The North American and South American markets will be provided by the North American facility with 12 million units in North America, 1 million units shipped to South America, and 7 million units remaining in the facility each year. Finally, the Asian facility will provide for the markets in Japan and rest of Asia and Australia annually with 7 million units and 3 million units, respectively. Part B

After the merger, the lowest achievable production and distribution network cost is $1,066.82 million; with $510 million for fixed cost and $556.82 for variable cost and import duty fees. Sleekfon will provide to North and South American, African, and both European markets. Their European facility will provide 4 million units to Europe, 11 million units to non-Europe countries in Europe, and 2 million units to Africa annually; with 3 million remaining as storage. The North American market will be served with 6 million units per year by the facility in North American; with 14 million remaining in storage. The market in South America will be served by its local plant with 5 million units per year; with 5 million units in storage. Sturdyfon’s facilities will serve markets in North America, Europe, Africa, Japan, and rest of Asia and Australia. The facility in Europe will provide 20 million units to the European market. Their North American facility will serve 16 million units to the North American market and 4 million units to the Japanese market. Finally, the facility in Asia will serve 5 million units to Japan and 5 million units to Rest of Asia and Australia annually. Part C

Considering the scaled back or shutdown option after the merger, the lowest annual achievable cost...
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