1. Lavare, located in the Chicago suburbs, is a major manufacturer of stainless steel sinks. Lavare is in the middle of the supply and demand planning exercise for next year. Distributors' anticipated monthly demand for the 12 months is shown in the following table Month Month # Demand January 1 12,000 February 2 14,000 March 3 14,000 April 4 18,000 May 5 19,000 June 6 20,000 July 7 22,000 8 August 27,000 September 9 30,000 October 10 28.0 00 November 11 14,000 December 12 11,000 Capacity at Lavare is governed by the number of machine operators it hires. The firm works 20 days a month, with a regular operating shift of eight hours a day. Any time beyond that is considered overtime. Regular time pay is $15 per hour and overtime is $22 per hour. Overtime is limited to 20 hours per month per employee. The plant currently has 250 employees. Each sink requires two hours of labor. It costs $3 to keep a sink in inventory for a month. The cost of materials per sink is $40. The sinks are sold to distributors for $125 each. We assume that no stockouts are allowed and that the beginning inventory coming in in January is 5,000 units and the desired ending inventory in December is also 5,000 units. (Use a separate worksheet in the SAME file!!) Market research has indicated that a promotion that reduces prices by 5 percent in a given month will increase sales in that month by 15 percent and will advance a demand of 20, 15 and 10 percent of each of the following three months.

What is the optimal production plan for the year if we do not assume promotions?
What is the annual profit of this plan? What is the cost of this plan? b. Is it better to promote in: – July or September?
How much increase in profit can be achieved as a result? C. If the sinks sell for $250 instead of $125, does the decision about the timing of the promotion change?