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Electric Sheep has the following projected demands for the next six months for one of its...

Electric Sheep has the following projected demands for the next six months for one of its products. Regular time is 160 units per month and overtime is a maximum of 20 units per month. Regular time is $20 per unit, overtime cost is $30 per unit, backorder cost is $20 per unit, inventory holding cost is $1 per unit and . Calculate the total inventory/backorder cost for a level production plan. Month Forecast 1 150 2 160 3 180 4 160 5 170 6 140 Question 1 options: $40 $65 $110 $215 $410 $510 $820 $1025

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Answer #1

Below will be the level production plan -

Month 1 2 3 4 5 6 Total
Forecast 150 160 180 160 170 140 960
Beginning Inventory 0 10 10 0 0 0
Regular Production 160 160 160 160 160 160 960
Overtime 0 0 10 0 10 0 20
Inventory 10 10 0 0 0 20 40
Cost
Regular Cost 3200 3200 3200 3200 3200 3200 19200
Overtime Cost 0 0 300 0 300 0 600
Inventory Cost 10 10 0 0 0 20 40

From above table, it is clear that there will not be back order,

Total Inventory/Back order cost = $40

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