Fixed Charge Model

Question 1

what is a fixed charge/fixed cost model

Answer 1

if any level of the activitiy takes place, there will be a charge!

Question 2

what does fixed charge naturally lead to?

Answer 2

IF statements, or non linear! so we make it linear via binary

Question 3

How to do it?

Answer 3

1. make a table
2. Put a binary variable area- this will be the ‘Produce?’ area [A DECISION VBL]
3. Put a units produced are- this will be the other DECISION VBL
4. NOW YOU NEED A LOGIC AREA (LOGICAL MAX):
   - ofc this would be simple to do with if statement but instead you do with logic
   - units produced <= max capacity *(0 or 1)
   - SO… you need to create a max capacity.. YOU DO THIS BY TAKING THE MIN OF the scenarios where all the resources are poured into the one item
   - to check… put in a big big number
5. solve like regular!