The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next...

  

Transcribed Image Text:

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April 1,400 1,600 1,700 1,800 May June July August 2,200 2,200 1,700 1,300 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 $70 per unit. Inventory holding cost is $25 per unit per month. Ignore any idle-time costs. Evaluate the following plan. This exercise contains only Plan D. 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 $55 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. Month 0 December 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 August Demand 1,400 1,600 1,700 1,800 2,200 2,200 1,700 1,300 Production O.T. Production (Units) (Units) 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 I▬▬▬▬▬▬▬ Plan D Ending Inventory 200 31 ||||||||| Stockouts (Units) Calculate O.T. Production, Ending Inventory, and Stockouts (units) The total overtime procution cost= $_____ The total inventory holding cost for January through August= $______ The total stockout cost=$_______ The total cost, excluding normal time labor costs, for Plan D= $_____ The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April 1,400 1,600 1,700 1,800 May June July August 2,200 2,200 1,700 1,300 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 $70 per unit. Inventory holding cost is $25 per unit per month. Ignore any idle-time costs. Evaluate the following plan. This exercise contains only Plan D. 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 $55 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. Month 0 December 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 August Demand 1,400 1,600 1,700 1,800 2,200 2,200 1,700 1,300 Production O.T. Production (Units) (Units) 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 I▬▬▬▬▬▬▬ Plan D Ending Inventory 200 31 ||||||||| Stockouts (Units) Calculate O.T. Production, Ending Inventory, and Stockouts (units) The total overtime procution cost= $_____ The total inventory holding cost for January through August= $______ The total stockout cost=$_______ The total cost, excluding normal time labor costs, for Plan D= $_____

Answer rating: 100% (QA)

Solution To evaluate Plan D we need to calculate the overtime production ending inventory stockouts total overtime production cost total inventory hol... View the full answer