Produce at a constant rate of 1,400 units per month from January - August. Use s

Question

Produce at a constant rate of 1,400 units per month from January - August. Use subcontracted labor for as much or as little as needed to meet overall demand.

Month Demand Production Beg. Inv. End Inv. Avg Inv Overtime Stockout Hire Layoff Subcontract Total 0 200 200 400 200 200 400 200 December January February March April May June uly August 1600 1400 1600 1800 1800 2200 2200 1800 1800 1600 1600 1400 1600 1800 1800 2200 2200 1800 300 300 100 0 0 0 200 0 0 400 400 0 0 $26,000 $0 $0 so So $0 $602,000 Summary Costs $576,000 Costs Unit Wage Rate Overtime Rate Subcontract Rate Inventory Rate Hire Rate Layoff Rate Stockout Rate $40 $50 $75 $20 $50 $75 $100

Explanation / Answer

Sub contracted units = 400 + 200 + 0 + 0 + 0 + 0 + 400 + 400 = 1400 units

Subcontracting cost = Sub-contracted units X Subcontract rate per unit

= 1400 X $75 = $105,000

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