Question: Why is the answer 218,000? Please show work and explain Aggregate demand for a product family is given in the table below for the 4
Why is the answer 218,000? Please show work and explain
Aggregate demand for a product family is given in the table below for the 4 quarters of 2007. The production strategy. is level production in which the same amount is produced in each quarter. The cost of increasing production from one quarter to the next are accounted for at $40 per unit of increase and the cost of decreasing production from one quarter to the next are accounted for at $80 per unit of decrease. The per unit cost of production is $30 per unit. The inventory cost is $40 per unit per quarter. Demand that cannot be met is a lost sale which is accounted for at $150 per unit Compute the total cost for 2007 (i.e.do not include the cost of carrying the initial inventory). (Take initial inventory into account when determining the production level; Take prior production into account to determine the change in production for the first quarter. Then determine the ending inventory and lost sales for each of the four quarters.) Quarter Demand Production Inventory Lost Sale 500 1000 Win07 1800 ? ? ? Spro7 1100 ? ? ? Sum07 1600 ? ? ? Fal07 900 ? ? 2 ? Answer: 198000 The correct answer is: 218000
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