The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 February 1,500 March 1,800 April 1,800 May2,300 June 2,300 July 1,900 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 $125 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 1,400 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $80 per unit. Subcontracting capacity is limited to 900 units per month. Evaluate this plan by computing the costs for January through August.
A.) Fill in the table below (enter your responses as whole numbers).
| Period |
Month |
Demand |
Production |
Ending Inventory ( *Not Including December) |
Subcontracts Units |
| 0 |
Dec |
|
|
200 |
|
| 1 |
Jan |
1400 |
1400 |
|
|
| 2 |
Feb |
1500 |
1400 |
|
|
| 3 |
March |
1800 |
1400 |
|
|
| 4 |
April |
1800 |
1400 |
|
|
| 5 |
May |
2300 |
1400 |
|
|
| 6 |
June |
2300 |
1400 |
|
|
| 7 |
July |
1900 |
1400 |
|
|
| 8 |
Aug |
1400 |
1400 |
|
|
B.)The total subcontracting cost= ?(Enter your response as a whole number.)
C.)The total inventory carrying cost=? (Enter your response as a whole number.)
D.)The total cost, excluding normal time labor costs,is=? (Enter your response as a whole number.)