Letherin Hides is a company that makes boots specifically targeting college students. Forecasts of sales for the next year are 200 in the summer, 450 in the fall, and 500 in the winter. Accessories that are used on the boots are purchased from a supplier for $31.66. The cost of capital is estimated to be 24% per year (or 6% per quarter); thus, the holding cost per item is 0.06(31.66)=$1.9 per quarter (rounded figure). Letherin Hides hires freelance art designers at part-time to craft designs during the summer, and they earn $6.00 per hour. In the fall, labor is more difficult to keep, and the owner must pay $6.50 per hour to retain qualified help. Because of the high demand for part-time help during the winter holiday season, labor rates are higher in the winter, and workers earn $7.75 per hour. Each boot design takes 2 hours to complete. How should production be planned over the three quarters to minimize the combined production and inventory holding costs?

The table below provides information on Letherin Hides boot design cost and production.

According to the linear optimization model, what is the total amount to be produced & inventory held in summer/fall/winter?

Transcribed Image Text:

Letherin Hides Data Summer Fall Winter Unit Production Cost 12 13 15.5 Unit Inventory Holding Cost 1.9 1.9 1.9 Demand 200 450 500 Letherin Hides Data Summer Fall Winter Unit Production Cost 12 13 15.5 Unit Inventory Holding Cost 1.9 1.9 1.9 Demand 200 450 500

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