...13.9 The S&OP team at Kansas Furniture, has received the following estimates of demand requirements: July Aug Sept. Oct. Nov. 1,000 1,200 1,400 1,800 1,800 Dec. 1,800 Stephanie Klein-Davis/The Roandke Times/ AP Images a) Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $25 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis: ◆ Plan A: Produce at a steady rate (equal to minimum require- ments) of 1,000 units per month and subcontract additional units at a $60 per unit premium cost. ◆ Plan B: Vary the workforce, to produce the prior month's demand. The firm produced 1,300 units in June. The cost of hiring additional workers is $3,000 per 100 units produced. The cost of layoffs is $6,000 per 100 units cut back. Note: Both hiring and layoff costs are incurred in the month of the change, (i.e. going from production of 1,300 in July to 1,000 in Au- gust requires a layoff (and related costs) of 300 units in August, just as going from production of 1,000 in August to 1,200 in September requires hiring (and related costs) of 200 units in September). P b) Which plan is best and why?

...13.9 The S&OP team at Kansas Furniture, has received the following estimates of demand requirements: July Aug Sept. Oct. Nov. 1,000 1,200 1,400 1,800 1,800 Dec. 1,800 Stephanie Klein-Davis/The Roandke Times/ AP Images a) Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $25 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis: ◆ Plan A: Produce at a steady rate (equal to minimum require- ments) of 1,000 units per month and subcontract additional units at a $60 per unit premium cost. ◆ Plan B: Vary the workforce, to produce the prior month's demand. The firm produced 1,300 units in June. The cost of hiring additional workers is $3,000 per 100 units produced. The cost of layoffs is $6,000 per 100 units cut back. Note: Both hiring and layoff costs are incurred in the month of the change, (i.e. going from production of 1,300 in July to 1,000 in Au- gust requires a layoff (and related costs) of 300 units in August, just as going from production of 1,000 in August to 1,200 in September requires hiring (and related costs) of 200 units in September). P b) Which plan is best and why?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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