ABX manufactures large freezers for grocery stores. ABX is presently trying to plan itsproduction and inventory levels for the next six months. Because of seasonal fluctuations inutility and raw materials costs, the per unit cost of producing freezers varies from month tomonth-as does the demand for the products. Production capacity also varies from month tomonth due to differences in the number of working days, vacations, and scheduledmaintenance and training. The following table summarizes the monthly production costs,demands, and production capacity that ABX's management expects to face over the next 6months.Unit DemandedMonthUnit Production Cost $225MaximumProduction11,2004,0002$2503,0003,2003$2305,0003,8005$275 $2906,00065,500 3,500 3,6004,000$2603,000The warehouse can hold a maximum of 5,500 units in inventory at the end of each month.Management wants to keep at least 1,500 units in inventory as safety stock to balancevariations in demand. To maintain stable workforce, the company wants to produce no lessthan one half of its maximum production capacity each month. The accounting departmentestimates that the cost of carrying a unit in any month is approximately equal to 1.5% of theunit production cost in the same month. ABX estimates the number of units carried ininventory each month by averaging the beginning and ending inventory for each month. What is the best total production and inventory cost?

123456Unit production cost$225$250$230$275$290$260Units demanded1,2003,0005,0005,5003,5003,600Max.…

Answered: ABX manufactures large freezers for…

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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