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,

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 $20 per unit per month. Ignore any idle-time costs. The plan is called plan B. Plan B: Produce at a constant rate of 1,200 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 1,100 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 filling in the table below (enter your responses as whole numbers). Subcontract Units Demand Ending Inventory 200 Production Period Month 0 December 1 January 2 February 3 March 1,200 4 April May 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,700 1,700 1,800 2,200 2,300 1,800 1,500 5 6 June 7 July August 8 The total subcontracting cost = $ (Enter your response as a whole number.) The total inventory carrying cost = $ (Enter your response as a whole number.) The total cost, excluding normal time labor costs, is = $ (Enter your response as a whole number.) Enter your answer in each of the answer boxes

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!