The Demand Forecast for the Next Four Periods Is 90,100,120,and

question 62

Essay

The demand forecast for the next four periods is 90,100,120,and 140 units respectively.The plant has a regular capacity of 100 units per period,an overtime capacity of 10 units per period,and a subcontractor capacity of 5 units per period.There is a $5 per unit charge for regular production,an $8 per unit charge for overtime production,and a $9 per unit charge for subcontracting.The holding cost is $3 per unit per period,no shortages are allowed and the company has 5 units in inventory at the start of the planning period.
a.How many units should be produced using overtime?
b.How many units should be produced using subcontracting?
c.What is the total inventory holding cost?
d.What is the lowest total plan cost?
e.Fill out this table showing the number of units made by period using each type of production and the resulting inventory at the end of each period.

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Definitions:

Fixed Length

A predetermined or established length or duration that does not change.

Future Value

Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Positive Rate Of Return

A situation where an investment or project yields a profit or return that exceeds the initial outlay.

Projects

Planned sets of interrelated tasks to be executed over a fixed period and within certain cost and other limitations.