Question

The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $20 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis: Plan A: Produce at a steady rate (equal to minimum requirements) of 1,100 units per month and subcontract additional units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers). Demand 1300 Ending Inventory 0 Subcontract (Units) 200 Month 1 July 2 August 3 September 4 October Production 1,100 1,100 1,100 1150 0 50 1100 0 0 1600 0 500 5 November 1900 1,100 1,100 1,100 0 800 6 December 1900 0 800 The total cost, excluding normal time labor costs, for Plan A = $ 141000. (Enter your response as a whole number.)
Please help with the missing numbers above

Also

Total hiring cost $ _?(enter response as whole number)

Total layoff cost $ _?(enter response as whole number)

Total inventory carrying cost $ _?(enter response as whole number)

Total stockout cost $ _?(enter response as whole number)

Total cost, excluding normal time labor costs, for Plan B $ _?(enter response as whole number)

Answer 1

Based on the given data, we solve for Plan B using POM-QM as shown below:

We enter the required data as shown below:

Period Demand Regular time Capacity Overtime Capacity Subcontract Capacity Unit costs Value 1 2 3 4 1300 1150 1100 1600 1900 1900 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 Regular time Overtime Subcontracting Holding/carrying cost Lost sales cost Increase cost Decrease cost Initial Inventory Units last period 0 0 0 20 100 30 65 0 1300 03

On solving, we get

Demand Regular time Capacity Regular time production Inventory (end PD) Shortage (end PD) Units increase Units decrease Initial Inventory = 0 0 1 unlimited 1300 0 0 0 0 2 0 0 3 0 150 4 1300 1150 1100 1600 1900 1900 8950 0 50 5 0 1300 1150 1100 1600 1900 8350 @$0 /unit $0 150 0 200 0 0 300 0 300 0 0 350 600 @$20 /unit @$100/unit $7000 $60000 0 6 Total(units) 500 300 800 @$30 /unit $24000 200 @$65 /unit $13000 Subtotal Costs Total Cost $104000

Based on above, we tabulate the required data in the table format as per question:

Month Demand Production Hire (Units) 0 Layoff (units) 0 Ending Inventory 0 150 200 Stockouts (Units) 0 0 0 0 0 0 1 July 2 August 3 September 4 October 5 November 6 December 1300 1150 1100 1600 1900 1900 1300 1300 1150 1100 1600 1900 0 150 50 0 0 300 500 300 0 0 300 0 0

As seen from above,

Total hiring cost $ 24000

Total layoff cost $ 13000

Total inventory carrying cost $ 7000

Total stockout cost $ 60000

Total cost, excluding normal time labor costs, for Plan B $ 104000

-----------------------------------------------------------------------------------------------------------------------

In case of any doubt, please ask through the comment section before Upvote/downvote.

If you liked the answer, please give an upvote. This will be quite encouraging for me, thank-you!!!