The correct answer is 259,500 for the \"total cost\" for 2008. Please include fo

Question

The correct answer is 259,500 for the "total cost" for 2008. Please include formulas/steps to get there.

Aggregate demand for a product family is given in the table below for the 4 quarters of 2008. The production strategy is level production, in which the same amount is produced in each quarter. The cost of increasing production from one quarter to the next is accounted for at $40 per unit of increase and the cost of decreasing production from one quarter to the next is accounted for at $80 per unit of decrease. The per unit cost of production is $30 per unit. The inventory cost is $40 per unit per quarter. Demand that cannot be met is a lost sale which is accounted for at $150 per unit. Compute the total cost for 2008 (i.e. do not include the cost of carrying the initial inventory, nor prior production). (Take initial inventory into account when determining the production level; Take prior production into account to determine the change in production for the first quarter. Then determine the ending inventory and lost sales for each of the four quarters.)

Explanation / Answer

Answer:

Answer: Quarter Demand Production Ending Inventory Lost Sale 1300 0 0 Q1 1800 1800 0 Q2 1100 1100 200 0 Q3 1600 1600 0 100 Q4 900 900 400 0 Total production = 5400 Extra production = 1000 Lost sales = 1400 Cost of one unit = $30 Cost of increasing and decreasing production = $40 + $80 = $150 Therefore total cost = $259,550

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.