A Manager Has Prepared a Forecast of Expected Aggregate Demand

question 107

Essay

A manager has prepared a forecast of expected aggregate demand for the next six months.Develop an aggregate plan to meet this demand given this additional information: A level production rate of 100 units per month will be used.Backorders are allowed,and they are charged at the rate of $8 per unit per month.Inventory holding costs,using average monthly inventory levels,are $1 per unit per month.Determine the cost of this plan if regular time cost is $20 per unit and beginning inventory is zero.

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Definitions:

Probability

A statistical measure representing the chance or likelihood that a particular event will happen, expressed as a fraction or percentage.

NPV Value

Net Present Value, a calculation used in finance to determine the value of a series of future cash flows projected to be received or paid, adjusted for the time value of money.

Probability

A scale from 0 to 1 used to quantify the likelihood of an event's occurrence.

Sensitivity Chart

A graphical method used to display how the uncertainty in the output of a mathematical model or system can be apportioned to different sources of uncertainty in its inputs.