Question: Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of
Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is $125 per unit. Inventory holding cost is $25 per unit per month. Ignore any idle-time costs. The plan is called plan B.
Plan B: Produce at a constant rate of 1,500 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $80 per unit. Subcontracting capacity is limited to 600 units per month. Evaluate this plan by computing the costs for January through august.
In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filing in the table below (enter your responses as whole numbers).

Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
