Annual Fixed Cost

Variable Production and Shipping Costs (Euro per unit) (Millions of Euro per
North (j=1) East (j=2) South (j=3) West (j=4) Capacity year Tax rate
Hot&Cold France (i=1) 100 110 105 100 50 1,000 25%
Germany (i=2) 95 105 110 105 50 1,000 25%
Finland (i=3) 90 100 115 110 40 850 30%
Demand (Millions of unit) 30 20 20 35
CaldoFreddo U.K (i=4) 105 120 110 90 50 1,000 20%
Italy (i=5) 110 105 90 115 60 1,150 35%
Demand (Millions of unit) 15 20 30 20

Average sell price 300

(Euro)

n (number of factory location) 5

m (number of demand point) 4
Dj (Demand from market j)
cij (production and shipping costs)

RESULTS
Min Costs Max Profit
Before merger 23,550 32,900
Merger - no shutdown 0 34,225
Merger - shutdown 22,400 34,600
 Minimizing Costs

Inputs - Costs etc.

Variable Production and Shipping Costs
Supply city North East South West Fixed cost Capacity
France 100 110 105 100 1,000 50
Germany 95 105 110 105 1,000 50
Finland 90 100 115 110 850 40
Demand 30 20 20 35
U.K 105 120 110 90 1,000 50
Italy 110 105 90 115 1,150 60
Demand 15 20 30 20

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 0 0 15 35 1
Germany 0 10 5 0 1
Finland 30 10 0 0 1
U.K 15 0 0 20 1
Italy 0 20 30 0 1

Constraints
Supply city Excess Capacity
France 0
Germany 35
Finland 0
U.K 15
Italy 10

North East South West

Unmet demand (1) 0 0 0 0
Unmet demand (2)] 0 0 0 0

Objective Function
Cost 23,550

Maximizing Profits

Inputs - Costs etc.

Variable Production and Shipping Costs
Supply city North East South West Fixed cost Capacity Tax
France 100 110 105 100 1,000 50 25%
Germany 95 105 110 105 1,000 50 25%
Finland 90 100 115 110 850 40 30%
Demand 30 20 20 35
U.K 105 120 110 90 1,000 50 20%
Italy 110 105 90 115 1,150 60 35%
Demand 15 20 30 20

Revenue
Variable Production and Shipping Costs
Supply city North East South West
France 300 300 300 300
Germany 300 300 300 300
Finland 300 300 300 300
U.K 300 300 300 300
Italy 300 300 300 300

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 50 0 0 0 1
Germany 50 0 0 0 1
Finland 40 0 0 0 1
U.K 0 0 0 0 1
Italy 0 0 0 50 1

Constraints
Supply city Excess Capacity
France 0
Germany 0
Finland 0
U.K 0
Italy 0

North East South West

Unmet demand (1) 160 300 300 300
Unmet demand (2)] 300 300 300 250

Objective Function
Cost 32,900
 Minimizing Costs

Inputs - Costs etc.

Supply city
France
Germany
Finland
U.K
Italy
Demand

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 0 0 0 5 1
Germany 5 40 0 0 1
Finland 40 0 0 0 1
U.K 0 0 0 50 1
Italy 0 0 50 0 1

Constraints
Supply city Excess Capacity
France -5
Germany -45
Finland -40
U.K -50
Italy -50

North East South West

Unmet demand -45 -40 -50 -55

Objective Function
Cost 0

Maximizing Profits

Inputs - Costs etc.

Variable Production and Shipping Costs
Supply city North East South West Fixed cost Capacity Tax
France 100 110 105 100 1,000 50 25%
Germany 95 105 110 105 1,000 50 25%
Finland 90 100 115 110 850 40 30%
U.K 105 120 110 90 1,000 50 20%
Italy 110 105 90 115 1,150 60 35%
Demand 45 40 50 55
 Revenue
Variable Production and Shipping Costs
Supply city North East South West
France 300 300 300 300
Germany 300 300 300 300
Finland 300 300 300 300
U.K 300 300 300 300
Italy 300 300 300 300

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 0 0 0 5 1
Germany 5 40 0 0 1
Finland 40 0 0 0 1
U.K 0 0 0 50 1
Italy 0 0 50 0 1

Constraints
Supply city Excess Capacity
France 45
Germany 5
Finland 0
U.K 0
Italy 10

North East South West

Unmet demand 0 0 0 0

Objective Function
Cost 34,225
 Minimizing Costs

Inputs - Costs etc.

Variable Production and Shipping Costs
Supply city North East South West Fixed cost Capacity
France 100 110 105 100 1,000 50
Germany 95 105 110 105 1,000 50
Finland 90 100 115 110 850 40
U.K 105 120 110 90 1,000 50
Italy 110 105 90 115 1,150 60
Demand 45 40 50 55

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 0 0 45 5 1
Germany 45 0 5 0 1
Finland 0 40 0 0 1
U.K 0 0 0 50 1
Italy 0 0 0 0 0

Constraints
Supply city Excess Capacity
France 0
Germany 0
Finland 0
U.K 0
Italy 0

North East South West

Unmet demand 0 0 0 0

Objective Function
Cost 22,400

Maximizing Profits

Inputs - Costs etc.

Variable Production and Shipping Costs
Supply city North East South West Fixed cost Capacity Tax
France 100 110 105 100 1,000 50 25%
Germany 95 105 110 105 1,000 50 25%
Finland 90 100 115 110 850 40 30%
U.K 105 120 110 90 1,000 50 20%
Italy 110 105 90 115 1,150 60 35%
Demand 45 40 50 55
 Revenue
Variable Production and Shipping Costs
Supply city North East South West
France 300 300 300 300
Germany 300 300 300 300
Finland 300 300 300 300
U.K 300 300 300 300
Italy 300 300 300 300

Decision Variables
Demand City Plants
Supply city North East South West (1=Open)
France 0 0 50 0 1
Germany 5 40 0 5 1
Finland 40 0 0 0 1
U.K 0 0 0 50 1
Italy 0 0 0 0 0

Constraints
Supply city Excess Capacity
France 0
Germany 0
Finland 0
U.K 0
Italy 0

North East South West

Unmet demand 0 0 0 0

Objective Function
Cost 34,600