The demand for ice cream during the summer months (June, July, and August) at a parlor is estimated at 500, 600, and 400 20-gallon cartons. Two wholesalers, 1 and 2, supply the parlor with its ice cream. Although the flavors from the two suppliers are different, they are interchangeable. The maximum number of cartons either supplier can provide is 400 per month. Also, the price the two suppliers charge change from one month to the next according to the following schedule:
Price per carton: June, July, August
Supplier 1: $100, $110, $120
Supplier 2: $115, $108, $125
To take advantage of price fluctuation, the parlor can purchase more than is needed for a month and store the surplus to satisfy the demand in a later month. The cost of refrigerating an ice-cream carton is $5 per month. It is realistic to assume that the refrigeration cost is a function of the average number of cartons on hand during the month.
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This solution involves finding the optimal solution to price fluctuation.
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