Continue Example 1 with the nested L -shaped method until you obtain an optimal solution. Example 1 Suppose we are planning production of air conditioners over a three month period. In each month, we...

Continue Example 1 with the nested L -shaped method until you obtain an optimal solution.

Example 1

Suppose we are planning production of air conditioners over a three month period. In each month, we can produce 200 air conditioners at a cost of $100 each. We may also use overtime workers to produce additional air conditioners if demand is heavy, but the cost is then $300 per unit. We have a one-month lead time with our customers, so that we know that in Month 1, we should meet a demand of 100. Orders for Months 2 and 3 are, however, random, depending heavily on relatively unpredictable weather patterns. We assume this gives an equal likelihood in each month of generating orders for 100 or 300 units