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1. DryIce, Inc., is a manufacturer of air conditioners that has seen its demand grow significantly. The company anticipates nationwide demand for the next year to be 180000 units in the South, 120000 units in the Midwest, 110000 units in the East, and 100000 units in the West. Managers at DryIce are designing the manufacturing network and have selected four potential sites New York, Atlanta, Chicago, San Diego. Plants could have a capacity of either 200000 or 400000 units. The annual fixed costs at the four locations are shown in the following table, along with the cost of producing and shipping an air conditioner to each of the four markets. Where should DryIce build its factories and how large should they be? (60 pts)

Production and transport costs for DryIce, Inc.
	New York	Atlanta	Chicago	San Diego
Annual fixed cost of 200000 units plant	$6 million	$5.5 million	$5.6 million	$6.1 million
Annual fixed cost of 400000 units plant	$10 million	$9.2 million	$9.3 million	$10.2 million
East	$211	$232	$238	$299
South	$232	$212	$230	$280
Midwest	$240	$230	$215	$270
West	$300	$280	$270	$225

Shipped from NY Shipped from Atlanta Shipped from Chicago Shipped from San Diego Unmet demand New York Atlanta Chicago San Diego Requirements Fixed Costs 400k 200k Variable Costs East South Midwest West Large (400k) Small (200k) Excess capacity Cost 211 232 240 300 10,000,000 6,000,000 232 212 230 280 9,200,000 5,500,000 240 230 215 270 9,300,000 5,600,000 300 280 270 225 10,200,000 6,100,000 TOTAL SYSTEM COST The optimal total cost is 129,480,000 Shipped from NY Shipped from Atlanta Shipped from Chicago Shipped from San Diego Unmet demand New York Atlanta Chicago San Diego Requirements Fixed Costs 400k 200k Variable Costs East South Midwest West Large (400k) Small (200k) Excess capacity Cost 211 232 240 300 10,000,000 6,000,000 232 212 230 280 9,200,000 5,500,000 240 230 215 270 9,300,000 5,600,000 300 280 270 225 10,200,000 6,100,000 TOTAL SYSTEM COST The optimal total cost is 129,480,000

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