Reddick's Specialty Electronics Makes Weatherproof Surveillance Systems for Parking Lots

question 63

Essay

Reddick's Specialty Electronics makes weatherproof surveillance systems for parking lots. Demand estimates for the next four quarters are 25, 9, 13, and 17 units. Prepare an aggregate plan that uses inventory, regular time and overtime and back orders. Subcontracting is not allowed. Regular time capacity is 15 units for quarters 1 and 2, 18 units for quarters 3 and 4. Overtime capacity is 3 units per quarter. Regular time cost is $2000 per unit, while overtime cost is $3000 per unit. Back order cost is $300 per unit per quarter; inventory holding cost is $100 per unit per quarter. Beginning inventory is zero.
The data inputs for this problem, and the optimal solution, generated by microcomputer software, appear below. Answer the following questions based on the scenario and the solution.
a. How many total units will be produced in quarter 1 for delivery in quarter 1?
b. How many units in total will be used to fill back orders over the four quarters?
c. What is the cost to produce one unit in Quarter 4 using overtime to deliver in quarter 1 (filling a back order)?
d. At the end of quarter 3, what is the ending inventory of finished systems?
e. What is the total cost of the solution?
f. What is the average cost per unit?

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Definitions:

Expected Profit Rate

The anticipated return on an investment, taking into account both the probability of gains and the risk of losses.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal.

Velocity of Circulation

The rate at which money exchanges hands in the economy, influencing overall economic activity and inflation.

Equation of Exchange

Shows the relationship among four variables: M (the money supply), V (velocity of circulation), P (the price level), and Q (the quantity of goods and services produced). MV = PQ.