In this we start with 200 leftover inventory. We start evaluating the plan month
ID: 373322 • Letter: I
Question
In this we start with 200 leftover inventory.
We start evaluating the plan month by month:
Inventory = Leftover + Production - Demand
January : Inventory : 200 + 1600 - 1400 = 400
February : Inventory : 400 + 1600 - 1600 = 400
...so on until April
In May, demand is more that our inventory, hence additional 320 units are produced. Even then 180 stockout is there due to lack of units.
Similarly in June, the stockout is 280 units.
Overtime production cost = $50 * (320 + 320 + 320) = $48000
Inventory holding cost = $20 * (400 + 400 + 400 + 100 + 20 + 320) = $32800
Stockout cost = $60 * (180 + 280) = $27600
Month Demand Production(Units) OT Production(Units) Ending Inventory Stockout(Units) Dec 200 Jan 1400 1600 - 400 - Feb 1600 1600 - 400 - Mar 1600 1600 - 400 - Apr 1900 1600 - 100 - May 2200 1600 320 0 180 Jun 2200 1600 320 0 280 Jul 1900 1600 320 20 - Aug 1300 1600 - 320 -Explanation / Answer
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows January February March April 1,400May 1,600 1,600 1,900 August 2,200 2,200 1,900 1,300 June July Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is S60 per unit. Inventory holding cost is $20 per unit per month. Ignore any dle-time costs. Evaluate the following plan. This exercise contains only Plan D Plan D: Keep the current workforce stable at producing 1 600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less. Note: Do not produce in overtime if production or inventory are adequate to cover demand.
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