The Academic Company Mixes and Bottles a High-Energy Beverage in Various

question 78

Multiple Choice

The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students. The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
Table 1
$$\begin{array} { | l | l | } \hline \text { QUARTER } & \begin{array} { l } \text { FORECAST DEMAND PER } \\1,000 \text { GALLONS }\end{array} \\\hline 1 & 400 \\\hline 2 & 700 \\\hline 3 & 850 \\\hline 4 & 650 \\\hline \text { TOTAL: } & 2,600 \\\hline\end{array}$$
Academic's management makes the following assumptions:
$\bullet$ Each employee works 550 standard hours of regular time each quarter.
$\bullet$ On average, it takes 27 hours to produce and package 1 unit (1,000 gallons) .
$\bullet$ Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour.
$\bullet$ Inventory-holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter.
$\bullet$ Because of extremely hot weather, there is no beginning inventory available to start Quarter 1.
$\bullet$ Management wants a constant work force (no hiring or firing) .
$\bullet$ Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees.
______________________________________________________________________________
-Using the data in Table 1, determine the annual inventory-holding cost if Academic decides to use a level production rate of 650 units per quarter.

• A) $2,925.00
• B) $1,012.50
• C) $2,025.00
• D) $4,500.00

Recognize how processes can be designed for environmental friendliness and social responsibility.

Understand the impact of technology on service processes and the customer experience.

Understand the concept of the time value of money and its application in investment decision-making.

Learn to calculate and interpret the net present value (NPV) of an investment.

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Definitions:

Lottery Tickets

Pieces of paper or digital receipts purchased in hopes of winning a large sum of money through a process of random selection.

Production Possibilities Curve

A graphical representation that shows the maximum quantity of one good that can be produced for every possible quantity of another good produced, given available resources and technology.

Decreasing Opportunity Costs

A situation in which the opportunity costs of resources decrease as more of a good is produced.

Increasing Opportunity Costs

A situation where increasing production of one good requires larger and larger sacrifices in the production of another good due to limited resources.