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27 May, 07:09

Determine the total cost for this plan given the following forecast:

Month 1 2 3 4 5 6

Forecast 380 400 420 440 460 480

Use steady regular output of 400 unites per month, use overtime as needed for up to 40 unites per month, and use subcontracting to make up any needed output to match the forecast. Unit costs are:

Regular output = $25

Overtime = $40

Subcontract = $60

Average balance inventory = $15

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  1. 27 May, 07:32
    0
    Month

    1 2 3 4 5 6

    Units

    Forecasted Demand 380 400 420 440 460 480

    Regular Production 400 400 400 400 400 400

    Overtime 0 0 0 40 40 40

    Subcontracting 0 0 0 0 20 40

    Inventory at end of month 20 20 0 0 0 0

    Cost

    Regular Production $10,000 $10,000 $10,000 $10,000 $10,000 $10,000

    Overtime production cost $0 0 $0 $1,600 $1,600 $1,600

    Subcontract cost $0 0 $0 $0 $1,200 $2,400

    Inventory holding cost $300 $300 $0 $0 $0 $0

    Total Cost $69,000
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