Question

Suppose that demand data for widgets made by XYZ Inc. is given below. Using an appropriate method (level , chase or mixed), plan the production (i.e. specify the production quantities and complete the table below) such that the total cost is made as small as possible. Regular time production capacity is 7000 units per month. They can also produce in overtime up to 5000 units per month. There is no other method of production and the cost of regular time work force is fixed and it does not depend on the amount produced and hence may be omitted in the cost calculations. Overtime production costs an additional $1.00 per unit. Holding cost per unit per month is $2.00, and shortage cost is $5.00 per unit per month, (short units must be supplied at a later period, but within the 5 month planning horizon.) what is the total inventory holding cost (use ending inventory to calculate this cost), total shortage cost, total overtime cost and the total cost of your plan?

	September	October	November	December	January
Demand	8000	12000	4000	11000	13000
Any unfulfilled order (from previous month/s)
Beginning Inventory
Production Units (Reg Time)
Production units (Overtime)
Quantity Available for shipment
Actual Shipment
Shortage
Ending Inventory					Target is 2000
Shortage cost
Inventory holding cost
Over time cost

Total cost of the Plan:

Answer 1