The Kleenglass Corporation makes an excellent dishwasher which is highly in dema
ID: 419206 • Letter: T
Question
The Kleenglass Corporation makes an excellent dishwasher which is highly in demand. Orders have been received from several retail stores for delivery over the next three months. The demand for these dishwashers is given in the table.
Month
June
July
August
Demand
195
215
205
Due to limited capacity only 200 of these dishwashers can be produced per month at a cost of $300. However if the company uses overtime they can produce an additional 15 dishwashers per month at a cost of $325. The company has the option of storing excess production in inventory with a holding cost of $20 per dishwasher.
How many regular time units should be produced in June? [a]
Use Excel Quiz 6, LP 2
Month
June
July
August
Demand
195
215
205
Explanation / Answer
Cost of producing 200 units is $300
If they apply additional resources and produce 215 units the cost will be $325 + $20(holding cost) = $345
While when we can see that there are additional costs for making extra dishwashers, we also have to consider this fact that if the company produces 215 units every month, they will be able to fulfill the demand and attain the cash flows as the product is already very much famous.
So the regular time units that must be produced by the company in June should be 215 units at a cost of $345.
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