A manager has prepared a forecast of expected aggregate demand for the next 3 mo
ID: 380932 • Letter: A
Question
A manager has prepared a forecast of expected aggregate demand for the next 3 months and developed an aggregate plan to meet this demand given this additional information: A level production rate of 100 units per month was used. Back orders are allowed, but not overtime . Backorders are charged at the rate of $8 per unit per month. From this plan ?(1) and ?(2) are
Periods
1
2
3
Forecast
100
130
140
Production
100
100
100
Demand - Forecast
0
-30
-40
Inventory
Beginning
0
0
0
Ending
0
? (1)
?(2)
Average
0
Backlog
? (3)
? (4)
Periods
1
2
3
Forecast
100
130
140
Production
100
100
100
Demand - Forecast
0
-30
-40
Inventory
Beginning
0
0
0
Ending
0
? (1)
?(2)
Average
0
Backlog
? (3)
? (4)
Explanation / Answer
Periods
1
2
3
Forecast
100
130
140
Production
100
100
100
Demand - Forecast
0
-30
-40
Inventory
Beginning
0
0
0
Ending
0
0
0
Average
0
Backlog
30
40
SInce backorder is allowed, the remaining demand in period 2 & period 3 will be used to meet the demand. The ending inventory for both periods will be 0, since we are not producing more than demand and the backorders will be ordered only as per forecast demand written in "Backlog"
Periods
1
2
3
Forecast
100
130
140
Production
100
100
100
Demand - Forecast
0
-30
-40
Inventory
Beginning
0
0
0
Ending
0
0
0
Average
0
Backlog
30
40
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