The monthly forecasts for Gravity Room Furniture Ltd. (GRF), a manufacturer of outdoor furniture, is shown in the table below. The factory is open for 6 hrs/day and 25 days/month. To produce one unit, an employee needs 30 hrs of labor, and gets paid $5/hr for regular time and $6/hr for overtime, with a maximum of 20 hrs of overtime per month (per employee). The materials needed to make a unit cost $50. GRF can hire and train a new employee for $500 and lay off one for $400. Inventory costs $3 per unit on hand at the end of each month. At present, 140 employees are on the payroll, anticipated starting inventory is 100 units, and GRF would like to end the year with the same level of inventory. Month Demand Jan 300 Feb 300 Mar 500 Apr 500 May 700 June 900 July 1300 Aug 1600 Sept 900 Oct 500 Nov 300 Dec 300 A. what is the stockout cost? B. What is the subcontractor cost? C. A third party has offered to produce the furniture as needed at a cost of $230 per unit (this includes material costs). should GRF use a third party? Explain in detail the reasons behind your decision.
The monthly
| Month | Demand |
| Jan | 300 |
| Feb | 300 |
| Mar | 500 |
| Apr | 500 |
| May | 700 |
| June | 900 |
| July | 1300 |
| Aug | 1600 |
| Sept | 900 |
| Oct | 500 |
| Nov | 300 |
| Dec | 300 |
A. what is the stockout cost?
B. What is the subcontractor cost?
C. A third party has offered to produce the furniture as needed at a cost of $230 per unit (this includes material costs). should GRF use a third party? Explain in detail the reasons behind your decision.
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