18) Byron\'s Manufacturing makes tables. Demand for the next four months and cap

Question

18) Byron's Manufacturing makes tables. Demand for the next four months and capacities of the plant are shown in the table below. Unit cost on regular time is $40. Overtime cost is 150% of regular time cost. Subcontracting is available in substantial quantity at $75 per unit. Holding costs are $5 per table per month; back orders are not permitted. Byron's management believes that the transportation algorithm can be used to optimize this scheduling problem. The firm has 50 units of beginning inventory and anticipates no ending inventory. How many units will be produced by subcontracting over the four-month period?

March April May June Demand 400 600 600 700 Regular capacity 400 400 400 400 Overtime capacity 100 100 100 100 Subcontract cap. 150 50 50 50

Explanation / Answer

The answer is option "e" 250 units.

Solution:

Thus the answer is 100+50+50+50 = 250

March April May June Demand 400.00 600.00 600.00 700.00 less: beginning inventory (50.00) (250.00) (200.00) 150.00 Net demand 350.00 350.00 400.00 550.00 Regular capacity production 400.00 400.00 400.00 400.00 Overtime capacity production 100.00 100.00 100.00 100.00 Subcontract production 100.00 50.00 50.00 50.00 Total produced 600.00 550.00 550.00 550.00 Closing balance 250.00 200.00 150.00 0.00 Cost Total costs Regular 16,000.00 16,000.00 16,000.00 16,000.00 64,000.00 Overtime 6,000.00 6,000.00 6,000.00 6,000.00 24,000.00 Subcontracting 7,500.00 3,750.00 3,750.00 3,750.00 18,750.00 Holding cost 1,250.00 1,000.00 750.00 0.00 3,000.00 Total 109,750.00

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