Describe the Differences Between Level, Chase, and Mixed Production Plans

question 10

Essay

Describe the differences between level, chase, and mixed production plans. Use the forecast in the table to show the differences by creating a plan of each type. There is no beginning inventory and regular production capacity is 350 units. Overtime costs $10 extra and is limited to 50 units per month. Subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40 per unit and there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in inventory.
$$\begin{array} { | l | c | } \hline { \text { Month } } & \text { Forecast } \\\hline \text { Tanuary } & 250 \\\hline \text { February } & 300 \\\hline \text { March } & 500 \\\hline \text { April } & 350 \\\hline\end{array}$$

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Definitions:

Valve Division

A dedicated segment of a company focusing on the production or distribution of valves.

Variable Expenses

Costs that vary directly with the level of business activity or production volume.

Transfer Price

The price charged by one segment of a company for a product or service that is supplied to another segment of the same company.

Valve Division

A specialized department within a company focused on the production and distribution of valves.