Refer to Solved Problem 17.1. Suppose Cool Air Inc. has a maximum regular time production capacity of 900 air conditioners per month for the months of January through October and only 600 air conditioners in November and December. Use a level strategy of maximum regular time production each month, and use overtime and subcontracting to absorb demand variations. No backlogs are allowed and ending inventory should be zero at the end of December. Overtime usage is limited to a production of 300 units per month and subcontracting to 200 units per month. Inventory carrying cost is $10/unit per month; regular time production cost is $200/unit; overtime costs are $300/unit; and subcontracting costs are $350/unit (all in U.S. dollars). Ignore employee idle time.

Data from Example 17.1

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DEMAND (IN PAIRS OF UNITS) MONTH MONTH DEMAND (IN PAIRS OF UNITS) July Jan 9,000 1,000 7,000 5,000 Feb Aug 1,200 Mar 1,600 Sept 4,000 Apr 3,000 Oct 2,000 5,700 May Nov 7,000 1,500 June Dec