A Firm Produces One Product on a Produce-To-Stock Basis and Is

question 49

Essay

A firm produces one product on a produce-to-stock basis and is trying to develop a master production schedule for production. The safety stock level for this product is 30 units, and the fixed lot size is 50 units. The beginning inventory is given as 50 units. The demand for this product comes from four different sources, and the demand estimates for the next four weeks are given as:
$\begin{array}{|l|l|l|l|l|}\hline & \text { Week } & & & \\\hline \text { Source } & 1 & 2 & 3 & 4 \\\hline \text { Intra-company orders } & 10 & 0 & 0 & 20 \\\hline \text { Warehouse Orders } & 0 & 20 & 0 & 10 \\\hline \text { R \& D Orders } & 10 & 0 & 10 & 0 \\\hline \text { Cistomer Orders } & 30 & 25 & 15 & 30 \\\hline \text { Total Weekly Demand } & 50 & 45 & 25 & 60 \\\hline\end{array}$
a.What is the production quantity for Week 2?
b.What is the beginning inventory for Week 4?

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Definitions:

Economic Profit

The difference between total revenues and the total costs of a firm, including both explicit and implicit costs.

Gas Station

A retail business establishment that sells fuel and engine lubricants for motor vehicles.

Prices Charged

The amount of money demanded by a business in exchange for its goods or services.

Long Run

A period during which all factors of production and costs are variable, allowing firms to adjust to desired levels.