Let ft(i) to be the minimum cost of meeting demands for months t, t+1, . . .

, 4 if i units are on hand

at the beginning of month t.

Let c(x) to be the cost of producing x units during a period. Then c(0) =0, and for x >0, c(x)=3+x.

Month 4 Computations

During month 4, the firm will produce just enough units to ensure that the month 4 demand of 4 units
is met. This yields

f4(0) =cost of producing 4-0 units=c(4)=3+4 =$7 and X4(0)=4-0 =4

f4(1) =cost of producing 4-1 units=c(3)=3+3 =$6 and X4(0)=4-1 =3

f4(2) =cost of producing 4-2 units=c(2)=3+2 =$5 and X4(0)=4-2 =2

f4(3) =cost of producing 4-3 units=c(1)=3+1 =$4 and X4(0)=4-3 =1

f4(4) =cost of producing 4-4 units=c(0)=$0 and X4(0)=4-4 =0

Month 3 Computations

For each possible production level x during month 3, the total cost during months 3 and 4

= (1/2)(i+x-2)+c(x)+f4(i+x-2)

To make it minimize, we write:

f3(i) = minx{(1/2)(i+x-2)+c(x)+f4(i+x-2)}

And we know x must be a member of {0, 1, 2, 3, 4, 5},

and x must satisfy : 0 i+x-2 4

(1/2)(i+x- f4(i+x Total Cost f3(i)

i x 2)+c(x) -2) Month 3,4 x3(i)

0 2 0+5=5 7 5+7=12 f3(0)=12

x3(0)=2

0 3 .5+6=6.5 6 6+6.5=12.5
0 4 1+7=8 5 8+5=13

0 5 1.5+8=9.5 4 9.5+4=13.5

1 1 0+4=4 7 7+4=11

1 2 .5+5=5.5 6 5.5+6=11.5

1 3 1+6=7 5 7+5=12

1 4 1.5+7=8.5 4 8.5+4=12.5

f3(1)=10
1 5 2+8=10 0 10+0=10 x3(1)=5

2 0 0+0=0 7 0+7=7

2 1 .5+4=4.5 6 4.5+6=10.5

2 2 1+5=6 5 6+5=11

2 3 1.5+6=7.5 4 7.5+4=11.5

f3(2)=7
2 4 2+7=9 0 9+0=9 x3(2)=0

3 0 .5+0=.5 6 .5+6=6.5 f3(3)=6.5

 3 1 1+4=5 5 5+5=10

3 2 1.5+5=6.5 4 6.5+4=10.5

3 3 2+6=8 0 8+0=8 x3(3)=0

4 0 1+0=1 5 1+5=6

4 1 1.5+4=5.5 4 5.5+4=9.5

f3(4)=6
4 2 2+5=7 0 7+0=7 x3(4)0

The same method is used for month 2 Computations and month 1 Computations. At last we will get
the table for month 1 Computations:

(1/2)(i+x- f4(i+x Total Cost

i x 2)+c(x) -2) Month 3,4 f3(i) x3(i)

0 1 0+4=4 16 4+16=20 f1(0)=20 x1(0)=1

0 2 .5+5=5.5 15 5.5+15=20.5
0 3 1+6=7 14 7+14=21

1.5+7=8.
0 4 5 12 8.5+12=20.5

10+10.5=20.
0 5 2+8=10 10.5 5

1 0 0+0=0 16 0+16=16

1 1 .5+4=4.5 15 4.5+15=19.5

1 2 1+5=6 14 6+14=20

1.5+6=7.
1 3 5 12 7.5+12=19.5

1 4 2+7=9 10.5 9+10.5=19.5 f1(1)=16 x1(1)=0

2 0 .5+0=.5 15 .5+15=15.5

2 1 1+4=5 14 5+14=19

1.5+5=6.
2 2 5 12 6.5+12=18.5

f1(2)=15.5
2 3 2+6=8 10.5 8+10.5=18.5 x1(2)=0
 3 0 1+0=1 14 1+14=15

1.5+4=5.
3 1 5 12 5.5+12=17.5

3 2 2+5=7 10.5 7+10.5=17.5 f13)=15 x1(3)=0

1.5+0=1. f1(4)=13.5x1(4)=
4 0 5 12 1.2+12=13.5 0

4 1 2+4=6 10.5 6+10.5=16.5

Therefore, the optimal production schedule incurs a total cost of $20 and produces 1 unit during
month 1, 5 units during month 2, 0 units during month 3, and 4 units during month 4.