Question: Given the following costs and demand forecasts, test these four strategies for meeting demand (a) level production with overtime and subcontracting, as needed (b) lever
Given the following costs and demand forecasts, test these four strategies for meeting demand
(a) level production with overtime and subcontracting, as needed
(b) lever production with backorders as needed
(c) chase demand
(d) 3000 units of regular production from April through September and as much regular, overtime, and subcontracting production in the other months as needed to meet annual demand. Determine the cost of each strategy.
Which strategy would you recommend ?
Beginning inventory - 0
Beginning workforce - 25 workers
Production rate - 100 fans per worker per month
Regular production cost - $40 per fan Overtime production cost - $60 per fan
Subcontracting cost - $70 per fan
Overtime capacity - not to exceed regular production
Subcontracting capacity - unlimited
Holding cost - $8 per fan
Hiring cost $2000
Firing cost $3000
Month and demand as follows
September - 1500
October - 1000
November - 600
December - 600
January - 600
February - 800
March - 1000
April - 1000
May - 4000
June - 6500
July - 6000
August - 4000
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