The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventory carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis: Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers). Subcontract Ending Demand Production Inventory Month (Units) 1 July 1000 1,000 2 August 1200 1,000 3 September 1400 1,000 4 October 1800 1,000 5 November 1800 1,000 December 1600 1,000
The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventory carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis: Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers). Subcontract Ending Demand Production Inventory Month (Units) 1 July 1000 1,000 2 August 1200 1,000 3 September 1400 1,000 4 October 1800 1,000 5 November 1800 1,000 December 1600 1,000
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
Related questions
Question
![The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit,
inventory carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:
Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional
units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers).
Subcontract
Ending
Demand Production Inventory
Month
1 July
(Units)
1000
1,000
2 August
1200
1,000
3 September
1400
1,000
4 October
1800
1,000
5 November
1800
1,000
6 December
1600
1,000
Overtime Capacity
Subcontract Cap
Month Demand Regular Time Capacity
July
August 1200
September
October 1800
1000
800
1,000
1,000
800
1400
1,000
800
1,000
800
November
1800
1,000
800
December
1600
1,000
800](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F60ae2238-d375-4701-9aec-2226c586eada%2F41520b77-a4ba-4da0-9437-d79a758f3a2a%2F1irsm2r_processed.png&w=3840&q=75)
Transcribed Image Text:The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit,
inventory carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:
Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional
units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers).
Subcontract
Ending
Demand Production Inventory
Month
1 July
(Units)
1000
1,000
2 August
1200
1,000
3 September
1400
1,000
4 October
1800
1,000
5 November
1800
1,000
6 December
1600
1,000
Overtime Capacity
Subcontract Cap
Month Demand Regular Time Capacity
July
August 1200
September
October 1800
1000
800
1,000
1,000
800
1400
1,000
800
1,000
800
November
1800
1,000
800
December
1600
1,000
800
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