Burke



|1. |Management of Sundown Rent-a-Car (see Problem 8-8) has decided that perhaps the cost during the six-month period is not the appropriate|

| |Cost to minimize because the agency may still be obligated to additional months on some leases after that time. For example, if Sundown|

| |had some cars delivered at the beginning of the sixth month, Sundown would still he obligated for two additional months on a |

| |three-month lease. Use LP to determine how many cars should be leased in each month on each type of lease to minimize the cost of |

| |leasing over the entire life of these leases. |

| |Problem 8-8: |

| |(Automobile leasing problem) Sundown Rent-a-Car, a large automobile rental agency operating in the Midwest, is preparing a leasing |

| |strategy for the next six months. Sundown leases cars from an automobile manufacturer and then rents them to the public on a daily |

| |basis. A forecast of the demand for Sundown’s cars in the next six months follows: |

| |Month March April May June July August |

| |Demand 420 400 430 460 470 440 |

| | |

| |Cars may be leased from the manufacturer for either three, four, or five months. These are leased on the first day of the month and are|

| |returned on the last day of the month. Every six months the automobile manufacturer is notified by Sundown about the number of cars |

| |needed during the next six months. The automobile manufacturer has stipulated that at least 50% of the cars leased during a six-month |

| |period must be on the five-month lease. The cost per month on each of the three types of leases are $420 for the three-month lease, |

| |$400 for the four-month lease, and $370 for the five-month lease. |

| |Currently, Sundown has 390 cars. The lease on 120 cars expires at the end of March. The lease on another 140 cars expires at the end of|

| |April, and the lease on the rest of these expires at the end of May. |

| |Use LP to determine how many cars should be leased in each month on each type of lease to minimize the cost of leasing over the |

| |six-month period. How many cars are left at the end of August? |

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