Question

Trexoid Inc. makes a popular video game console. Demand varies each month, with highest demand coming in the last quarter of the year. Regular production costs are $120 per unit and inventory carrying cost is $5/unit per quarter. Overtime production cost is $150 per unit. Assume that the 10 current Trexoid employees can produce 50,000 units per quarter in regular production and can work enough overtime hours to produce the amount required if a chase plan is employed. On the other hand, hiring cost is $5,000 per employee and firing cost is $10,000 per employee. Trexoid currently has 0 inventory on hand, and they would like to have 0 inventories at the end of the year. Forecasted demand is as follows:
Quarter 1 ..................................................... 30,000 units
Quarter 2 ...................................................... 20,000 units
Quarter 3 ...................................................... 70,000 units
Quarter 4 ...................................................... 120,000 units
What do you suggest to Trexoid management?


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  • CreatedMarch 30, 2015
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