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CMA Intermediate · Operations Management and Strategic Management · Transportation

A firm has plants P1, P2 and P3 with capacities of 40, 60 and 50 units, and warehouses W1, W2 and W3 with requirements of 30, 50 and 45 units. To apply standard transportation methods, what must be done?

Add a dummy destination with a requirement of 25 units at zero cost. Total supply is 150 units while total demand is 125, so supply exceeds demand by 25 units; the dummy destination absorbs this surplus and makes the problem balanced.

  1. AAdd a dummy destination with a requirement of 25 units and zero costsCorrect
  2. BAdd a dummy source with a capacity of 25 units and zero costs
  3. CAdd a dummy destination with a requirement of 150 units and zero costs
  4. DDelete the plant with the highest capacity

Explanation

Total supply = 40+60+50 = 150; total demand = 30+50+45 = 125. Supply exceeds demand by 25, so a dummy destination absorbing 25 units at zero cost balances the problem. A dummy source would be right only if demand exceeded supply.

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