Suppose that demand data for widgets made by XYZ Inc is given below. Using an ap
ID: 2498262 • Letter: S
Question
Suppose that demand data for widgets made by XYZ Inc is given below. Using an appropriate method (chase, level or mixed), plan the production i.e. specify the production quantities and complete the table below.. If holding cost per unit per month = 0.50, and shortage cost is $2.00 per unit per period, (short units must be supplied at a later period: You may have no shortage in the end, unless you have no capacity in any period to avoid shortage). What is the total inventory holding cost (use ending inventory to calculate this cost.)? Capacity is 7000 per month and all production costs are fixed costs.
January
February
March
April
Demand
4000
10000
2000
7000
Beginning Inventory
1000
Production
Shipments
Shortage
Ending Inventory
1000
Shortage cost
Inventory holding cost
Total cost of your plan:
January
February
March
April
Demand
4000
10000
2000
7000
Beginning Inventory
1000
Production
Shipments
Shortage
Ending Inventory
1000
Shortage cost
Inventory holding cost
Explanation / Answer
Using a mix level plan
Tptal inventory holding cost = 1500+500+500 = 2500
January February March April Demand 4000 10000 2000 7000 Beginning Inventory 1000 3000 0 1000 Production 6000 7000 3000 7000 Shortage 0 0 0 0 Ending inventory 3000 0 1000 1000 Shortage cost 0 0 0 Inventory holding cost 1500 0 500 500Related Questions
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