Question

The president of Hill Enterprises, Terri Hil, projects the firm's aggregate demand requirements over the next 8 months as follows: May January February ,600 June March April 1.700 August 2,300 2,300 1,900 1,400 1,700July Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $60 per unit. Inventory holding cost is $20 per unit per month. Ignore any dle-time costs. Evaluate the following plans D and E Plan D: Keep the current workforce stable at producing 1,600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less Note: Do not produce in overtime if production or inventory are adequate to cover demand.

Answer 1

Solution :

PLAN COSTS BeginningEnding Demand Regular Overtime nventory Inventory 0 0 StockoutOvertime Inventory Stockout Jan Feb Mar Apr May 1400 1600 1700 1700 2300 2300 1900 1500 14400 12800 1600 1600 1600 1600 1600 1600 1600 1600 200 0 8,000 8,000 7,600 16,000 12,000 4,400 380 0 4,000 320 320 320 300 0 1340 380 220 0 220 0 0 16,000 16,000 15,000 160 9,600 0 100 0 2,000 67,000 42,000 9,600 1,18,600