3) The Don Levine Corporation currently produces in four different cities: Decatur, Minneapolis, Carbondale, and St Louis. They send their product to three different warehouses named Ciro,
Blue Earth, and Des Moines. The table below shows the transportation cost of shipping from
their current plants to their warehouses.
To
Decatur Minneapolis Carbondale St. Louis Demand
Blue Earth 20 17
21
27 250
Ciro
27
20
28
200
Des Moines 22 25
22
31
350
Capacity 300 200
150
150
25
Their production cost per facility is shown in the table below.
Location Decatur Minneapolis Carbondale St. Louis
Production Cost 50 60
70
50
The variables are denoted using X## where the first number is the source and the second number
is the destination. Sources: Decatur = 1, Minneapolis = 2, Carbondale = 3, and St. Louis = 4.
Destinations: Blue Earth = 1, Ciro = 2 and Des Moines = 3.
a) Don Levine Corporation should ship how many goods from each production facility to each
warehouse? What is the cost (including production costs) of this shipping plan?
b) The State of Illinois is trying to convince the Don Levine Corporation to move their
production facility from St. Louis to East St. Louis. Management has determined that with the
incentives that Illinois has provided that production costs would be lower in Illinois but shipping
costs to Blue Earth and Ciro would be more expensive. The production cost in East St. Louis
would be $40 but the transportation costs to Blue Earth would be $29, to Ciro would be $30, and
to ship to Des Moines would be $30. Assume that the corporation shuts down its St. Louis plant
and moves all of its production to East St. Louis, which has a capacity of 150 units. How many
goods should be shipped from each production plant to each warehouse? What is the cost
(including production cost of this shipping plan? (Hint: the shipping plans are different)
I
In part b East St Louis is given the source number 5.
c) Given your answer to part a) and part b) should the Don Levine Corporation move its
production facility to East St Louis? Explain your answer.