A Cement Company Is Considering How to Expand Its Capacity

question 1

Essay

A cement company is considering how to expand its capacity and they are examining the use of overtime or subcontracting on a quarterly basis as possible options.They have the following information about their operation:
Aggregate demand = 30,000; 25,000; 27,000; and 31,000
Maximum capacity = 25,000 units
Labor standard = 2.45 hours/unit
Cost of overtime = $10.50/hour
Cost of subcontracting = $25.00/unit
a.What is the cost of overtime in quarter 1?
b.What is the total cost of subcontracting over four quarters?

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