Homework SourseThe president of Hill Enterprises Terri Hill projects the fi
The president of Hill Enterprises, Terri Hill, projects the firm\'s aggregate demand requirements over the next 8 months as follows:
January
1,200
May
2,100
February
1,600
June
2,200
March
1,800
July
1,900
April
1,700
August
1,400
Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan B.
Plan B: Produce at a constant rate of 1,200 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $75 per unit. Subcontracting capacity is limited to 1000 units per month. Evaluate this plan by computing the costs for January through August.
A) In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filling in the table below (enter your responses as whole numbers).
Period----
Month
Demand-----
Production-------
Ending Inventory--------
Subcontract Units
0
December
200
1
January
1200
1200
?
?
2
February
1600
1200
?
?
3
March
1800
1200
?
?
4
April
1700
1200
?
?
5
May
2100
1200
?
?
6
June
2200
1200
?
?
7
July
1900
1200
?
?
8
August
1400
1200
?
?
B) The total subcontracting costequals= ? (Enter your response as a whole number.)
C) The total inventory carrying cost = ? (Enter your response as a whole number.)
The total cost, excluding normal time labor costs, is = ? (Enter your response as a whole number.
| January | 1,200 | May | 2,100 |
| February | 1,600 | June | 2,200 |
| March | 1,800 | July | 1,900 |
| April | 1,700 | August | 1,400 |
Solution
B) The total subcontracting cost = $307,500
C) The total inventory carrying cost = $4,000
The total cost, excluding normal time labor costs = $311,500
Peri
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