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CMA Intermediate · Operations Management and Strategic Management · Transportation

A firm has three plants with total capacity of 900 units and four depots with total requirement of 750 units. To solve by the standard transportation method, the problem should be balanced by adding:

Add a dummy destination with demand of 150 units and zero transportation costs, because supply of 900 exceeds demand of 750. The surplus 150 units represent idle capacity, so no real cost is incurred on those allocations.

  1. AA dummy destination with demand 150 units and zero costCorrect
  2. BA dummy source with supply 150 units and zero cost
  3. CA dummy destination with demand 150 units and very high cost
  4. DA dummy source with supply 750 units and zero cost

Explanation

Supply (900) exceeds demand (750) by 150, so a dummy destination absorbing 150 units is added. Its unit costs are zero because units sent there are simply unused capacity. A dummy source would be needed only if demand exceeded supply.

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