Reddick's Specialty Electronics Makes Weatherproof Surveillance Systems for Parking Lots

question 107

Essay

Reddick's Specialty Electronics makes weatherproof surveillance systems for parking lots. Demand estimates for the next four quarters are 25, 9, 13, and 17 units. The firm is preparing an aggregate plan that uses inventory, regular time and overtime and back orders. Subcontracting is not allowed. Regular time capacity is 15 units for quarters 1 and 2, 18 units for quarters 3 and 4. Overtime capacity is 3 units per quarter. Regular time cost is $2000 per unit, while overtime cost is $3000 per unit. Back order cost is $300 per unit per quarter; inventory holding cost is $100 per unit per quarter. Beginning inventory is zero.
The data inputs for this problem, and the optimal solution, generated by microcomputer software, appear below. Answer the following questions based on the scenario and the solution.
(a) How many total units will be produced in quarter 1 for delivery in quarter 1?
(b) How many units in total will be used to fill back orders over the four quarters?
(c) What is the cost to produce one unit in Quarter 4 using overtime to deliver in quarter 1 (filling a back order)?
(d) At the end of quarter 3, what is the ending inventory of finished systems?
(e) What is the total cost of the solution?
(f) What is the average cost per unit?
Reddick's Specialty Electronics
Reddick's Specialty Electronics Solution

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Definitions:

Marginal Costs

The expense associated with the production of an extra unit of output, emphasizing its impact on total production cost.

Installation Costs

The expenses associated with setting up or installing equipment, machinery, or systems.

Touch Screen Terminals

Interactive devices featuring a touchscreen interface, allowing users to input data or commands directly by touching the screen.

Stores

Places where goods are kept for sale or distribution.