The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,100 February 1,500 June 2,300 March 1,800 July 1,900 April 1,700 August 1,400 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. Plan B: Produce at a constant rate of 1,400 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $80 per unit. Subcontracting capacity is limited to 900 units per month. Evaluate this plan by computing the costs for January through August. 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). Period Month Demand Production Ending Inventory Subcontract Units 0 December 200 1 January 1,400 1,400 nothing nothing 2 February 1,500 1,400 nothing nothing 3 March 1,800 1,400 nothing nothing 4 April 1,700 1,400 nothing nothing 5 May 2,100 1,400 nothing nothing 6 June 2,300 1,400 nothing nothing 7 July 1,900 1,400 nothing nothing 8 August 1,400 1,400 nothing nothing

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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The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows:

January	1,400	May	2,100
February	1,500	June	2,300
March	1,800	July	1,900
April	1,700	August	1,400

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.

Plan B: Produce at a constant rate of

1,400

units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of

$80

per unit. Subcontracting capacity is limited to

900

units per month. Evaluate this plan by computing the costs for January through August.

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).

Period	Month	Demand	Production	Ending Inventory	Subcontract Units
0	December			200
1	January	1,400	1,400	nothing	nothing
2	February	1,500	1,400	nothing	nothing
3	March	1,800	1,400	nothing	nothing
4	April	1,700	1,400	nothing	nothing
5	May	2,100	1,400	nothing	nothing
6	June	2,300	1,400	nothing	nothing
7	July	1,900	1,400	nothing	nothing
8	August	1,400	1,400	nothing	nothing

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