Question: The Westerbeck Company manufactures several models of automatic washers and
The Westerbeck Company manufactures several models of automatic washers and dryers. The projected requirements over the next year for their washers follow.
Current inventory is 100 units. Current capacity is 960 units per month. The average salary of production workers is $1,300 per month. Material costs $120/unit. Each production worker accounts for 30 units per month. Overtime is paid at time and a half. Any increase or decrease in the production rate costs $50/unit for tooling, setup, and line changes. This does not apply, however, to overtime. Inventory-holding costs are $25 per unit per month. Lost sales are valued at $75 per unit. Compare the costs of level and chase demand production plans.
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