The president of Hill Enterprises, Terri Hill, projects the firm\'s aggregate de

Question

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle - time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. The average monthly demand requirement = units. In order to arrive at the costs, first compute the ending inventory and stockout units for each month by filling in the table below

Explanation / Answer

As per the question , production plan is to have constant workforce and per month production is the average demand.

Period Month Demand Production Ending Inventory Stockouts unit Invetory cost $ Stockout cost $ 0 Dec. 200 1 Jan. 1200 1700 700 0 14000 0 2 Feb. 1500 1700 900 0 18000 0 3 Mar. 1600 1700 1000 0 20000 0 4 Apr. 1900 1700 800 0 16000 0 5 May 2100 1700 400 0 8000 0 6 Jun 2300 1700 0 200 0 20000 7 Jul. 1700 1700 0 200 0 20000 8 Aug. 1300 1700 400 Total 13600 13600 Average 1700

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