Hard Drives Inc. manufactures computer hard drives. Because demand has seasonal variations it is difficult to schedule production to keep costs to a minimum. Next year, managemant estimates that the demand for the hard drives will be 45000 units in the first quarter followed by 70000, 80000, and 200000 in the second, third, and forth quarters. The company's production capacity is restricted to 123000 units per quater. During the slow seasons the company must produce extra hard drives and store them in inventory to help meet demand during the high seasons, particularly during the forth quarter because Christmas sales makes this the highest sales quarter of the year. The production cost of a hard drive is £20 per unit and the company policy is to charge an inventory holding cost of £1.6 per hard drive per quarter for each unit in inventory at the beginning of a quarter. Assume that the company starts off the first quarter with 10000 units in inventory (with the holding costs to be paid in the first quarter) and wishes to end last quarter with 8000 in inventory (with the holding costs to be paid only next year and therefore to be excluded from the total costs). What is the minimal total costs (in £) at which the company can satisfy the demand for the hard drives?
Hard Drives Inc. manufactures computer hard drives. Because demand has seasonal variations it is difficult to schedule production to keep costs to a minimum.
Next year, managemant estimates that the demand for the hard drives will be 45000 units in the first quarter followed by 70000, 80000, and 200000 in the second, third, and forth quarters. The company's production capacity is restricted to 123000 units per quater.
During the slow seasons the company must produce extra hard drives and store them in inventory to help meet demand during the high seasons, particularly during the forth quarter because Christmas sales makes this the highest sales quarter of the year.
The production cost of a hard drive is £20 per unit and the company policy is to charge an inventory holding cost of £1.6 per hard drive per quarter for each unit in inventory at the beginning of a quarter.
Assume that the company starts off the first quarter with 10000 units in inventory (with the holding costs to be paid in the first quarter) and wishes to end last quarter with 8000 in inventory (with the holding costs to be paid only next year and therefore to be excluded from the total costs).
What is the minimal total costs (in £) at which the company can satisfy the demand for the hard drives?
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