The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: May June January February March April 1,400 1,700 1,700 1,900 Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is $125 per unit. Inventory holding cost is S unit per month. Ignore any idle-time costs. The plan is called plan B. Period Month 0 December January 1 2 February 3 March 4 April 5 May June July August 6 July August Plan B: Produce at a constant rate of 1,300 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $75 per unit. Subcontracting capa limited to 900 units per month. Evaluate this plan by computing the costs for January through August. 7 8 In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filling in the table below (enter your responses as whole numbers). D 2,100 2,200 1,700 1,300 Demand Production 1,400 1,700 1,700 1,900 2,100 2,200 1,700 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 Ending Inventory 200 131 Subcontract Units 00000000
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: May June January February March April 1,400 1,700 1,700 1,900 Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is $125 per unit. Inventory holding cost is S unit per month. Ignore any idle-time costs. The plan is called plan B. Period Month 0 December January 1 2 February 3 March 4 April 5 May June July August 6 July August Plan B: Produce at a constant rate of 1,300 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $75 per unit. Subcontracting capa limited to 900 units per month. Evaluate this plan by computing the costs for January through August. 7 8 In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filling in the table below (enter your responses as whole numbers). D 2,100 2,200 1,700 1,300 Demand Production 1,400 1,700 1,700 1,900 2,100 2,200 1,700 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 Ending Inventory 200 131 Subcontract Units 00000000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows:
May
June
January
February
March
April
1,400
1,700
1,700
1,900
Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is $125 per unit. Inventory holding cost is $20 per
unit per month. Ignore any idle-time costs. The plan is called plan B.
Period Month
December
January
0
1
2
February
3
March
4
April
5
May
6
June
July
August
July
August
Plan B: Produce at a constant rate of 1,300 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $75 per unit. Subcontracting capacity is
limited to 900 units per month. Evaluate this plan by computing the costs for January through August.
7
8
In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filling in the table below (enter your responses as whole numbers).
D
2,100
2,200
1,700
1,300
Demand Production
1,400
1,700
1,700
1,900
2,100
2,200
1,700
1,300
1,300
1,300
1,300
1,300
1,300
1,300
1,300
1,300
Ending
Inventory
200
Subcontract
Units
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