I've been trying to explain this Managerial Decision Making problem.
Problem- A Power Company is considering how to increase its generating capacity to meet expected demand in its growing service area. Currently, the company has 750 megawatts (MW) of generating capacity but projects it will need the following minimum generating capacities in each of the next five years:
Year
1 2 3 4 5
Minimum Capacity 780 860 950 1,060 1,180
In Megawatts (MW)
The company can increase its generating capacity by purchasing four different types of generators: 10 MW, 25 MW, 50 MW, and/or 100 MW. The cost of acquiring and installing each of the four types of generators in each of the next five years is summarized in the following table:
Cost of Generators (in $1,000s) in Year
Generator Size 1 2 3 4 5
10 MW $300 $250 $200 $170 $145
25 MW $460 $375 $350 $280 $235
50 MW $670 $558 $465 $380 $320
100 MW $950 $790 $670 $550 $460
Part 1- Formulate a mathematical programming model to determine the least costly way of expanding the companies generating assets to the minimum required levels.
Part 2- Implement your model in a spreadsheet and solve it.
Part 3- What is the optimal solution?
You need to explain Managerial Decision Making problem.