Question: Her operations manager is considering a new plan, which begins in January with units on hand and ends with zero inventory. Stockout cost of lost
Her operations manager is considering a new plan, which begins in January with units on hand and ends with zero inventory. Stockout cost of lost sales is $ per unit. Inventory holding cost is $ per unit per month. Ignore any idletime costs. The plan is called plan B
Plan B: Produce at a constant rate of units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $ per unit. Subcontracting capacity is limited to units per month. Evaluate this plan by computing the costs for January through August.
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