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Web Mercantile sells many household products through an on-line catalog. The company needs substantial warehouse space for storing its goods. Plans now are being made for leasing warehouse storage space over the next five months. Just how much space will be required in each of these months is known. However, since these space requirements are quite different, it may be most economical to lease only the amount needed each month on a month-by-month basis. On the other hand, the additional cost for leasing space for additional months is much less than for the first month, so it may be less expensive to lease the maximum amount needed for the entire five months. Another option is the intermediate approach of changing the total amount of space leased (by adding a new lease and/or having an old lease expire) at least once but not every month. The space requirements for the next five months are given below: Month Required Space 1 30,000 sq. ft. 2 20,000 sq. ft. 3 40,000 sq. ft. 4 10,000 sq. ft. 5 50,000 sq. ft Leasing Period (# of months) Cost per Sq. Ft. Leased 1 $65 2 $100 3 $135 4 $160 5 $190 The objective is to minimize the total leasing cost for meeting the space requirements. a) Identify verbally the decisions to be made, the constraints on these decisions, and the overall measure of performance for the decisions. b) Summarize the model in algebraic form by stating the decision variables, the objective function and constraints. Hint: Define your decision variables as Xij = amount of space leased in month i for a period of j months for i = 1, …, 5 and j = 1, …, 6 – i; for example, X24 = amount of space leased in month 2 for a period of 4 months. This problem has 15 variables.

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 B

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