Which MCQ answer is correct for part A and B? A.) A company’s demand forecast fo

Question

Which MCQ answer is correct for part A and B?

A.) A company’s demand forecast for the next 6 months is shown in the table below as daily demand
(units/day). Their average daily demand over the all 6 months is 41 units/day. If the company decides to
use subcontractor to help with the production, what production rate (units/day) for in-house production
should they set? (3%)
May June July August September October
43 33 45 36 40 46
a. 46
b. 33
c. 41
d. 36

B.) Which one of the following production plan is most likely to incur inventory holding cost?
a. Use a subcontractor
b. Use hiring and layoff to adjust workforce every month
c. Use constant workforce to produce at 41 units/day for the next 6 month
d. Use overtime to adjust production so that production meets demand

Explanation / Answer

A) The company should set the minimal demand as the in house production rate. Since the minimum demand is 33, it should set 33 as in house production and rest should be through sub contracting.

Correct answer is b) 33

B) The correct answer is

c. Use constant workforce to produce at 41 units/day for the next 6 month

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