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Osprey Fabrication Has the Following Aggregate Demand Requirements and Other

question 24

Essay

Osprey Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters.
 Quarter  Demand  Previous quarter’s output 1300 units 11400 Beginning inventory 0 units 21200 Stockout cost $50 per unit $10 per unit at end of 31600 Enventory holding cost  guarter 41500 Hiring workers $40 per unit  Laving off workers $80 per unit  Subcontractingcost $60 per unit  Unit cost $30 per unit  Overtine $15 extra per unit \begin{array}{|l|l|l|l|}\hline\text { Quarter } & \text { Demand } & \text { Previous quarter's output } & 1300 \text { units } \\\hline 1 & 1400 & \text { Beginning inventory } & 0 \text { units } \\\hline 2 & 1200 & \text { Stockout cost } & \$ 50 \text { per unit } \\\hline & & & \$ 10 \text { per unit at end of } \\3 & 1600 & \text { Enventory holding cost } & \text { guarter } \\\hline 4 & 1500 & \text { Hiring workers } & \$ 40 \text { per unit } \\\hline & & \text { Laving off workers } & \$ 80 \text { per unit } \\\hline & & \text { Subcontractingcost } & \$ 60 \text { per unit } \\\hline & & \text { Unit cost } & \$ 30 \text { per unit } \\\hline & &\text { Overtine } & \$ 15 \text { extra per unit }\\\hline\end{array} Which of the following production plans is better: Plan A-chase demand by hiring and layoffs; Plan B-pure level strategy, or Plan C-1350 level with the remainder by subcontracting?

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Definitions:

Monthly Interest Charge

The amount charged by a lender to a borrower for the use of assets on a monthly basis, calculated as a percentage of the principal.

Real Rate

The interest rate that has been adjusted for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Loan

A loan is an amount of money that is lent to a borrower, who agrees to repay it, plus interest, over a specified period of time.

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