Drew's company, Ace High, sells customized sets of poker chips. He is developing a plan for next year on a quarterly basis. The expected demand is 500, 900, 600 and 600 sets of chips, respectively, for quarters one through four. He currently has 80 sets on hand (initial inventory) that can be used to meet next year's demand. He can produce 450 per quarter at the regular rate of $60 per set. His team will work overtime when needed and available, producing up to 300 units in Q1, 150 in Q2, 150 in Q3 and 200 in Q4. Sets produced via overtime cost a total of $90 per set. He can leverage a competitor firm and outsource (subcontract) production at the cost of $110 per set, with a capacity of 100 units per quarter. Storage costs are $5 per set per quarter. Drew has determined that he will have a policy of back-ordering at a cost of $1.50. Based on utilizing the Transportation Method:

a. What is the optimal cost for Drew? [ Select ]

b. Were any units held over during the planning period? If so, how many and what was the total holding cost incurred? [ Select ]

c. How many total units would be produced via overtime? [ Select ]

d. How many units would be produced via subcontracting? [ Select ]

e. How many units of excess capacity are there? [ Select ]

f. Was there a need to back-order? If so, how many units and what was the total backordering cost? [ Select ]

Answer rating: 100% (QA)

Quiz a The optimal cost for Drew is 5650 per set which is the total cost of all resources used to produce each set from initial inventory through outsourcing To arrive at this figure we must first det... View the full answer