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Least Cost Method

The Least Cost Method is used to obtain an initial feasible solution for the transportation problem. It involves allocating quantities starting with the cell that has the minimum shipping cost. The method considers costs at each step to find the least expensive way to meet all supply and demand requirements. In the example problem, quantities are assigned to cells with the lowest available cost at each step until all supply and demand amounts are fulfilled. The total transportation cost for the solution is calculated as Rs. 955.

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3K views2 pages

Least Cost Method

The Least Cost Method is used to obtain an initial feasible solution for the transportation problem. It involves allocating quantities starting with the cell that has the minimum shipping cost. The method considers costs at each step to find the least expensive way to meet all supply and demand requirements. In the example problem, quantities are assigned to cells with the lowest available cost at each step until all supply and demand amounts are fulfilled. The total transportation cost for the solution is calculated as Rs. 955.

Uploaded by

Ian Kibe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Least Cost Method

Definition: The Least Cost Method is another method used to obtain the initial feasible solution
for the transportation problem. Here, the allocation begins with the cell which has the minimum
cost. The lower cost cells are chosen over the higher-cost cell with the objective to have the least
cost of transportation.

The Least Cost Method is considered to produce more optimal results than the North-west
Corner because it considers the shipping cost while making the allocation, whereas the North-
West corner method only considers the availability and supply requirement and allocation begin
with the extreme left corner, irrespective of the shipping cost.

Let’s understand the concept of Least Cost method through a problem given below:

In the given matrix, the supply of each source A, B, C is given Viz. 50units, 40 units, and 60
units respectively. The weekly demand for three retailers D, E, F i.e. 20 units, 95 units and 35
units is given respectively. The shipping cost is given for all the routes.

The minimum transportation cost can be obtained by following the steps given below:
1. The minimum cost in the matrix is Rs 3, but there is a tie in the cell BF, and CD, now the
question arises in which cell we shall allocate. Generally, the cost where maximum quantity can
be assigned should be chosen to obtain the better initial solution. Therefore, 35 units shall be
assigned to the cell BF. With this, the demand for retailer F gets fulfilled, and only 5 units are
left with the source B.
2. Again the minimum cost in the matrix is Rs 3. Therefore, 20 units shall be assigned to the cell
CD. With this, the demand of retailer D gets fulfilled. Only 40 units are left with the source C.
3. The next minimum cost is Rs 4, but however, the demand for F is completed, we will move to
the next minimum cost which is 5. Again, the demand of D is completed. The next minimum
cost is 6, and there is a tie between three cells. But however, no units can be assigned to the cells
BD and CF as the demand for both the retailers D and F are saturated. So, we shall assign 5 units
to Cell BE. With this, the supply of source B gets saturated.
4. The next minimum cost is 8, assign 50 units to the cell AE. The supply of source A gets
saturated.
5. The next minimum cost is Rs 9; we shall assign 40 units to the cell CE. With his both the
demand and supply of all the sources and origins gets saturated.

The total cost can be calculated by multiplying the assigned quantity with the concerned cost of
the cell. Therefore,

Total Cost = 50*8 + 5*6 + 35*3 +20*3 +40*9 = Rs 955.

Note: The supply and demand should be equal and in case supply are more, the dummy source is
added in the table with demand being equal to the difference between supply and demand, and
the cost remains zero. Similarly, in case the demand is more than supply, then dummy
destination or origin is added to the table with the supply equal to the difference in quantity
demanded and supplied and the cost being zero.

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