The president of Hill Enterprises, Terri Hill, projects the firm\'s aggregate de

Question

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows January February March April 1,450 1,700 1,700 1,700 May June Jul August 2,200 2,100 1,900 1,300 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $65 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. Evaluate the following plan This exercise contains only Plan E. Plan E: Keep the current workforce, which is producing 1,600 units per month, and subcontract to meet the rest of the demand. Subcontract cost is $80 per unit. Plan E Ending Production Month Demand (Units) Subcontract (Units) Invento 200 0 December 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 August 1,450 1,700 1,700 1,700 2,200 2,100 1,900 1,300 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 nter your answer in the edit fields and then click Check Answer

Explanation / Answer

Ans:

Subcontract(units) for the month = Previous month ending inventory + Production(units) of the month - Demand(units) of the month.

Ending inventory for the month = opening inventory + production - demand

Month Demand Production Subcontracting Ending inventory December 200 January 1450 1600 - 350 February 1700 1600 - 250 March 1700 1600 - 150 April 1700 1600 - 50 May 2200 1600 550 - June 2100 1600 500 - July 1900 1600 300 - August 1300 1600 - 300

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