A Company Has the Cost Structure Shown in the Table

question 72

True/False

A company has the cost structure shown in the table and faces a demand in July that exceeds capacity by 200 units. They enter June with an inventory of zero and a demand equal to capacity. Their best course of action in order to completely fill all of the orders for both June and July by the end of July is to subcontract the extra 200 units in June and hold the inventory one period for July's demand.
$$\begin{array} { | l | c | } \hline { \text { Managerial Lever } } & \text { Cost } \\\hline \text { Regular production } & \$ 1,000 / \text { unit } \\\hline \text { Overtime production } & \$ 1300 / \text { unit } \\\hline \text { Subcontracting } & \$ 1200 / \text { unit } \\\hline \text { Inventory holding } & \$ 100 / \text { unit/month } \\\hline \text { Backlog cost } & \$ 400 / \text { unit/month } \\\hline\end{array}$$

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Definitions:

Negative Side Effects

Undesirable and harmful outcomes or reactions caused by medication, treatment, or intervention.

Punishment

A consequence imposed following undesirable behavior, intended to decrease the likelihood of that behavior occurring again.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus.

Second-Order Conditioning

A form of conditioning in which a stimulus that has been conditioned as a reinforcer is used to condition a second stimulus, establishing a chain of associations.