Mylab Operations Management With Pearson Etext -- Access Card -- For Operations Management: Sustainability And Supply Chain Management (13th Edition)
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Chapter 13, Problem 5P
Summary Introduction

To evaluate: Plan C

Introduction: The aggregate plan is the output of sales and operations planning. The major concern of aggregate planning is the production time and quantity for the intermediate future. Aggregate planning would encompass a time prospect of approximately 3 to 18 months.

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Costs Previous quarter's output Beginning inventory Stockout cost for backorders Inventory holding cost 1,500 units O units $50 per unit $10 per unit for every unit held at the end of the quarter $40 per unit $80 per unit $30 per unit $15 extra per unit Not available Hiring workers Layoff workers Unit cost Overtime Subcontracting a) Use Chase Demand Strategy b) Use Level Production Strategy with Backordering
3. Your independent oil and gas company is considering the purchase at time zero of a 100 % working interest in a property. If you elect to develop the lease for an 87.5% revenue interest, the following costs will be incurred: in time zero, the lease bonus cost is $100,00o, intangible drilling costs are estimated at $550,000 while tangible completion costs are estimated at $300,000. Operating costs are estimated to remain constant at $8.00 per barrel (includes production costs, severance taxes and ad-valorem taxes) in each of years 1, 2, 3 and 4. Oil prices are forecasted to be $50.00 per barrel in each of years 1, 2, 3, and 4. Production is summarized in the following table. The escalated dollar minimum rate of return is 12.0%. Use net present value analysis to determine if the acquisition and development of this lease is economically viable: (a) Before considering income taxes, (b) Assuming income tax rate of 30%. (Expense 100% of intangible drilling costs at the end of first year,…
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