A Company Has the Cost Structure Shown in the Table

question 13

Multiple Choice

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: $$\begin{array} { | l | c | } \hline { \text { Managerial Lever } } & \text { Cost } \\\hline \text { Regular production } & \$ 1,000 / \text { unit } \\\hline \text { Overtime production } & \$ 1,300 / \text { unit } \\\hline \text { Subcontracting } & \$ 1,200 / \text { unit } \\\hline \text { Inventory holding } & \$ 100 / \text { unit/month } \\\hline \text { Backlog cost } & \$ 400 / \text { unit/month } \\\hline\end{array}$$

• A)subcontract 200 units in June and use 100% of their regular capacity in both June and July.
• B)subcontract 100 units in both June and July and use 100% of their regular capacity in both June and July.
• C)produce 200 units using overtime in July and use 100% of their regular capacity in both June and July.
• D)subcontract 200 units in July and use 100% of their regular capacity in both June and July.

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Definitions:

Amnesia

A condition characterized by the partial or complete loss of memory, often caused by brain injury, disease, or psychological trauma.

Mannitol (Osmitrol)

A type of sugar alcohol used as a medication to reduce pressure in the brain and eyes and as a diuretic.

Intracranial Pressure

The pressure within the skull that affects the brain function, which can lead to serious health issues if it becomes too high or too low.

Cerebral Edema

Swelling of the brain caused by the accumulation of fluid in the brain tissue, which can lead to increased intracranial pressure and potentially fatal complications.