Month Expected Demand Jul 1,000 Aug 1,200 Sep 1,400 Oct 1,800 Nov 1,800 Dec 1,800 Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $20 per unit per month, and subcontracting cost of $45 per unit. Evaluate the following plan: keep the current workforce steady at a level producing 1,300 units per month. Subcontract the remainder to meet demand. Assume that 300 units remaining from June are available in July. A) What is the total inventory carrying cost? B) What is the total subcontracting cost?
Month Expected Demand Jul 1,000 Aug 1,200 Sep 1,400 Oct 1,800 Nov 1,800 Dec 1,800 Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $20 per unit per month, and subcontracting cost of $45 per unit. Evaluate the following plan: keep the current workforce steady at a level producing 1,300 units per month. Subcontract the remainder to meet demand. Assume that 300 units remaining from June are available in July. A) What is the total inventory carrying cost? B) What is the total subcontracting cost?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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The S&OP team at Kansas Furniture has received the following estimates of demand requirements:
|
Month |
Expected Demand |
|
Jul |
1,000 |
|
Aug |
1,200 |
|
Sep |
1,400 |
|
Oct |
1,800 |
|
Nov |
1,800 |
|
Dec |
1,800 |
Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $20 per unit per month, and subcontracting cost of $45 per unit.
Evaluate the following plan: keep the current workforce steady at a level producing 1,300 units per month. Subcontract the remainder to meet demand. Assume that 300 units remaining from June are available in July.
A) What is the total inventory carrying cost?
B) What is the total subcontracting cost?
C) What is the stockout cost?
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