During the Next Four Quarters,an Automobile Company Must Meet (On

question 44

Essay

During the next four quarters,an automobile company must meet (on time)the following demands for cars: 4000 in quarter 1; 2000 in quarter 2; 5000 in quarter 3; 1000 in quarter 4.At the beginning of quarter 1,there are 300 autos in stock.The company has the capacity to produce at most 3000 cars per quarter.At the beginning of each quarter,the company can change production capacity.It costs $100 to increase quarterly production capacity by 1 unit.For example,it would cost $20,000 to increase capacity from 3000 to 3200.It also costs $60 per quarter to maintain each unit of production capacity (even if it is unused during the current quarter).The variable cost of producing a car is $2200.A holding cost of $160 per car is assessed against each quarter's ending inventory.It is required that at the end of quarter 4,plant capacity must be at least 4000 cars.Determine how to minimize the total cost incurred during the next 4 quarters.

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Definitions:

Discount

A reduction from the full amount or value of an item or security, often applied to bonds sold below their face value or to promote sales of products.

Coupon Interest Rate

The percentage of a bond's value that is paid out in interest to the bondholder annually, identical to the coupon rate.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the repayment of principal.

Par Value

The face value or nominal value of a bond, share of stock, or other financial instrument, usually representing its value upon issuance.