Question

# The S&OP team at Kansas Furniture, has received the following estimates of demand requirements: July Aug....

The S&OP team at Kansas Furniture, has received the following estimates of demand requirements:

 July Aug. Sept. Oct. Nov. Dec. 1,800 1,200 1,400 1,800 1,000 1,600

Assume regular-time production cost of \$50 per unit, inventory carrying costs of \$25 per unit per month, and 100 unit beginning inventory at the beginning of July. Create an aggregate plan that would produce at a steady rate of 1,300 units per month and subcontract additional units at a \$60 per unit premium cost. What is the cost of this plan?

 Demand Beginning     Inventory Regular Time Production Subcontract Ending Inventory July 1800 Aug. 1200 Sept. 1400 Oct. 1800 Nov. 1000 Dec. 1600 Total

Regular Time Production Cost =

Subcontract Cost =

Inventory Cost =

Total Cost =

 Demand Beginning inventory Regular time production Subcontract Ending inventory July 1800 100 1300 400 0 Aug 1200 0 1300 0 100 Sept 1400 100 1300 0 0 Oct 1800 0 1300 500 0 Nov 1000 0 1300 300 Dec 1600 300 1300 300 0 Units 7800 1200 400 Cost 50 60 25 Total cost 390000 72000 10000 472000

Regular Time Production Cost = \$390000

Subcontract Cost = \$72000

Inventory Cost = \$10000

Total Cost = \$472000