Consider the Following Data That Illustrates Demand,production Costs,and Expected Capacity

question 24

Essay

Consider the following data that illustrates demand,production costs,and expected capacity for a given product.

$\begin{array}{lllll} &&\text { Month }\\& 1 &2 &3&4 \\\text { Demand (units) } & 100 & 125 & 200 & 175 \\\text { Production cost/Unit } & \$ 20 & \$ 25 & \$ 30 & \$ 35 \\\text { Production Capacity (units) } & 150 & 150 & 150 & 150\end{array}$ .

Inventory carrying costs are estimated at $4 per unit per month.The firm wants to produce at least 50 units per month to uniformly utilize its existing resources.Assume that beginning inventory is zero.Use Excel to formulate and solve this problem to determine how many units of the product should be produced monthly to meet the expected demand at minimal cost.

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Definitions:

Two-Tail Test

A statistical hypothesis test in which the critical area of a distribution is two-sided and tests whether a sample is either greater than or less than a certain range of values.

Sample Proportions

The ratio of members within a sample that satisfy a given characteristic, often used to estimate the proportion of the characteristic in the entire population.

Standard Error

The standard deviation of the sampling distribution of a statistic, often used in constructing confidence intervals around a sample statistic to estimate the population parameter.

Test Statistic

A metric deduced from a sample's data in the process of hypothesis testing, which aids in determining the rejection of the null hypothesis.