you are the operations manager for an OEM manufacturing plant that produces YBOX

Question

you are the operations manager for an OEM manufacturing plant that produces YBOX game consoles. Based on the sales record from 2010, the marketing manager forecasts the demand for Jan- May of 2011 in Table 1: Table 1 JAN. 2,500 FEB. 3,000 MAR. 4,000 APR. 3,500 MAY 3,000 Relevant information is given in Table 2: Table 2 Production Time 1 hour per unit Average labor cost $10 per hour Workweek 5 days, 8 hours per day Days per month 20 work days per month Beginning inventory 1,000 units Safety stock One month Shortage cost $20 per unit per month Carrying cost $5 per unit per month *(Sum of Production Requirement hr./unit)/(Sum of Production Hours Available x 8 hr./day) = (16,000 x 1)/(100x 8) = 23 As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. Assuming you currently have 23 workers, what is the inventory cost for May? 1. A. $2,000 2. B. $2,500 3. C. $3,000 4. D. $3,500 5. E. $4,500

Explanation / Answer

D. $3,500

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