Question

The? S&OP team at Kansas? Furniture, has received estimates of demand requirements as shown in the table. Assuming? one-time stockout costs for lost sales of ?$125 per? unit, inventory carrying costs of

?$30 per unit per? month, and zero beginning and ending? inventory, evaluate these two plans on an incremental cost? basis:

Plan? A: Produce at a steady rate? (equal to minimum? requirements) of 1,000 units per month and subcontract additional units at a ?$65 per unit premium cost. Subcontracting capacity is limited to 800 units per month.

?(Enter all responses as whole numbers?).

Month             Demand          Production      Ending Inventory        Subcontract(Units)

July                  1000                  1000 0                                   0

August 1200                  1000 0 200   

September 1400 1000 0 400

October 1800 1000 0 800

November 1800 1000 0 800   

December 1800 1000 0 800

The total ?cost, excluding normal time labor? costs, for Plan A? = $195,000

Plan? B: Vary the workforce to produce the prior? month's demand. The firm produced 1,300 units in June. The cost of hiring additional workers is $30 per unit produced. The cost of layoffs is $65 per unit cut back.

NEED FOR EACH MONTH:

Production Hire (Units) Layoff (Units) Ending Inventory Stockouts (Units)Need for each month

?(Enter all responses as whole? numbers.)

Note: Both hiring and layoff costs are incurred in the month of the change? (i.e., going from production of 1,300 in July to 1,000 in August requires a layoff (and related costs) of 300 units in August).

	Month	Demand	Production	Hire (Units)	Layoff (Units)	Ending Inventory	Stockouts (Units)
1	July	1000
2	August	1200
3	September	1400
4	October	1800
5	November	1800
6	December	1800

What is the total hiring cost?

What is the total layoff cost?

What is the total inventory carrying cost?

What is the total stockout cost?

The total? cost, excluding normal time labor? costs, for Plan B? ?

Answer 1

Solution :