In this method, we allocate as much as possible in the lowest cost cell or cells and then move to the next lowest cost cell/cells and so on. Let us solve the above problem using the least cost method.
Distribution centers

A 
X 
Y 
Supply 


Rs.2000  Rs.=5380 
1000 
Plants 
B 
X_{11}1000 
X_{12}0 
1500 

Rs.2500 
Rs.2700 


C 
X_{21}1300 
X_{22}=200 
1200 

Rs.2550 
Rs.1700 


X_{21}=0 
X_{32}=1200 


Demand 
2300 
1400 

Here the lowest cost cell is CY (Rs. 1700) and maximum possible allocation, meting supply and demand requirement is made here i.e., 1200. This meets the supply position of row 3 and hence it is crossed out.
The next least cost cell is AX (2000). Maximum possible allocation of 1000 is made here and row one is crossed out. Next lowest cost cell is BX (2500) and maximum possible allocation of 1300 is made here as the total demand in column X is 2300 and we have already allocated 1O00 in cell AX. Next lowest cost cell is CX (2550) only 0 can be allocated here to meet the demand (2300) and supply (1200) position. Next cell with lowest cost is BY (2700). Here allocation of 200 is possible. The next lowest cost cell is A Y where only 0 allocation is possible.
Hence
Z = Rs. (2000 × 1000 + 2500 × 1300 + 2700 × 200 + 1700 × 1200)
= Rs. 78,30,000.
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