Washington Laundry Products, Inc., makes commercial and industrial laundry machi
ID: 376849 • Letter: W
Question
Washington Laundry Products, Inc., makes commercial and industrial laundry machines (the kinds hotels use), and has these aggregate demand requirements for the next six months. The firm has regular capacity for 140 units, and overtime capacity for 40 more. Currently, subcontracting can supply up to 100 units per month, but the subcontracting firm may soon be unavailable.
Month
Demand
Costs and other data
1
220
Previous output level
100 units
2
160
Beginning inventory
200 units
3
200
Stockout cost
$250 per unit
4
210
Inventory holding cost
$100 per unit at end of month
5
200
Unit Cost, regular time
$1,200 per unit
6
190
Subcontracting
$2,000 per unit
Unit Cost, overtime
$1,500 per unit
Hiring workers
$200 per unit
Firing workers
$500 per unit
The firm is pursuing a strategy over the coming year to produce a base quality of 120 using first overtime, and then subcontracting, to meet demand.
What is the cost?
1.251.000
1.668.000
1.334.000
1.330.000
none
Month
Demand
Costs and other data
1
220
Previous output level
100 units
2
160
Beginning inventory
200 units
3
200
Stockout cost
$250 per unit
4
210
Inventory holding cost
$100 per unit at end of month
5
200
Unit Cost, regular time
$1,200 per unit
6
190
Subcontracting
$2,000 per unit
Unit Cost, overtime
$1,500 per unit
Hiring workers
$200 per unit
Firing workers
$500 per unit
Explanation / Answer
The answer is 1,330,000
Total cost = 864,000 + 210,000 + 240,000 + 1000 + 15000 = 1,330,000
Month Demand Regular Overtime Sub-contracting Inv (end of month) Increase initial inv Decrease initial inv Beg Inv 200 1 220 120 0 0 100 5 30 2 160 120 0 0 60 0 0 3 200 120 20 0 0 0 0 4 210 120 40 50 0 0 0 5 200 120 40 40 0 0 0 6 190 120 40 30 0 0 0 Total 1180 720 140 120 0 30 per unit cost 1200 1500 2000 200 500 Cost incurred 864,000 210,000 240,000 1000 15000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.