The Wetski Water Ski Company is the world’s largest producer of water skis. As you might suspect, water skis exhibit a highly seasonal demand pattern, with peaks during the summer months and valleys during the winter months. Given the following costs and quarterly sales forecasts, use the transportation method to design a production plan that will economically meet demand. What is the cost of the plan?
Quarter Sales Forecast
1 ...........50,000
2 ............150,000
3 ............200,000
4 ...........52,000
Inventory carrying cost.......$3.00 per pair of skis per quarter
Production per employee ......1000 pairs of skis per quarter
Regular workforce ..........50 workers
Overtime capacity ........50,000 pairs of skis
Subcontracting capacity ........40,000 pairs of skis
Cost of regular production ....$50 per pair of skis
Cost of overtime production ....$75 per pair of skis
Cost of subcontracting .......$85 per pair of skis