Manager Chris Channing of Fabric Mills, Inc., has developed the forecast shown i

Question

Manager Chris Channing of Fabric Mills, Inc., has developed the forecast shown in the table for bolts of cloth. The figures are in hundreds of bolts. The department has a normal capacity of 275(00) bolts per month, except for the seventh month, when capacity will be 250(00) bolts. Normal output has a cost of $40 per hundred bolts. Workers can be assigned to other jobs if production is less than normal. The beginning inventory is zero bolts.

Develop a chase plan that matches the forecast and compute the total cost of your plan. Overtime is $60 per hundred bolts. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Would the total cost be less with regular production with no overtime, but using a subcontractor to handle the excess above normal capacity at a cost of $50 per hundred bolts? Backlogs are not allowed. The inventory carrying cost is $2 per hundred bolts. (Round your Average values to 1 decimal place. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Manager Chris Channing of Fabric Mills, Inc., has developed the forecast shown in the table for bolts of cloth. The figures are in hundreds of bolts. The department has a normal capacity of 275(00) bolts per month, except for the seventh month, when capacity will be 250(00) bolts. Normal output has a cost of $40 per hundred bolts. Workers can be assigned to other jobs if production is less than normal. The beginning inventory is zero bolts.

Explanation / Answer

Formulas and explanations:

a. regular production*$40 = regular costs.

overtime production*$60 = overtime costs.

Overtime is required when forecast>regular production.

b. regular costs = regular production*$40

Inventory carrying cost = average inventory*$2

total cost = regular cost+subcontracting cost+inventory carrying cost

a              1              2              3              4              5              6              7                   Total   Forecast 250 300 250 300 280 275 270 1,925     Output        Regular 250 275 250 275 275 275 250 1,850     Overtime 0 25 0 25 5 0 20 75     Subcontract      Output - Forecast      Inventory        Beginning        Ending        Average      Backlog         Costs:      Output        Regular 10,000 11,000 10,000 11,000 11,000 11,000 10,000 74,000     Overtime 0 1,500 0 1,500 300 0 1,200 4,500     Subcontract      Inventory      Backorder         Total 10,000 12,500 10,000 12,500 11,300 11,000 11,200 78,500 No overtime and using a subcontractor b              1              2              3              4              5              6              7                   Total   Forecast 250 300 250 300 280 275 270 1,925     Output        Regular 275 275 275 275 275 275 250 1,900     Overtime 0 25 0 25 5 0 20 75     Subcontract      Output - Forecast 25 -25 25 -25 0 0 0 0   Inventory        Beginning 0 25 0 25 0 0 0     Ending 25 0 25 0 0 0 0        Average 12.50 12.50 12.50 12.50 0.00 0.00 0.00      Backlog         Costs:      Output        Regular 11,000 11,000 11,000 11,000 11,000 11,000 10,000 76,000     Overtime 0 0 0 0 0 0 0 0     Subcontract 0 0 0 0 250 0 1,000 1,250   Inventory 25 25 25 25 0 0 0      Backorder         Total 11,025 11,025 11,025 11,025 11,250 11,000 11,000 77,350

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.