
Concept explainers
Interpretation:
Costs of level and chase demand production plans.
Concept Introduction:
Chase strategy is a strategy used by company to meet uncertain demands of customers. Company produces so much goods that there is enough inventory for end users. This strategy is used usually by companies to optimally reduce cost of inventory.

Answer to Problem 5PA
The total cost using chase strategy is $546,240.
Explanation of Solution
Given information:
Month | J | F | M | A | M | J | J | A | S | O | N | D |
Litres (1000s) | 200 | 120 | 75 | 40 | 15 | 7 | 5 | 10 | 30 | 70 | 120 | 130 |
Following is the step wise calculation of level strategy (Note − units in 1,000 liters)
Following is the calculation of holding inventory Holding inventory = Normal Production + On-hand inventory − Demand
Holding inventory = 100 + 90 − 200
Holding inventory / Shortage = 10
The holding inventory / shortage is 10 units
Following is the calculation of Normal Production cost Normal Production cost = Normal production
Normal Production cost = 90
Normal Production cost = $36,000
Following is the holding cost Holding cost = Holding inventory
Holding cost = 15
Holding cost = $450
Following is the total cost Total cost = Normal production cost + Holding inventory cost
Total cost = 36000 + 450
Total cost = $36,450
Following is the calculation of level strategy
J | F | M | A | M | J | J | A | S | O | N | D | |
Demand | 200 | 120 | 75 | 40 | 15 | 7 | 5 | 10 | 30 | 70 | 120 | 130 |
On-handDelivery | 100 | 0 | 0 | 11 | 65 | 140 | 223 | 308 | 388 | 448 | 468 | 438 |
Normal production | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 |
Holding inventory | 15 | 65 | 140 | 223 | 308 | 188 | 448 | 408 | 438 | 348 | ||
Units shortage | 10 | 30 | ||||||||||
Level strategy cost | ||||||||||||
Normalproduction | 36,000 | 36,000 | 34,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 |
Holding cost | 0 | 0 | 450 | 1950 | 4,200 | 6090 | 9240 | 11640 | 13,440 | 14040 | 13140 | 10440 |
Total cost | 36,000 | 36,000 | 34,450 | 37,950 | 40,200 | 42,090 | 41,240 | 47,640 | 49,440 | 50,040 | 49140 | 46,440 |
I | F | M | A | M | I | J | A | S | O | N | D | |
Demand | 200 | 120 | 75 | 40 | 15 | 7 | 5 | 10 | 30 | 70 | 120 | 130 |
On-handDelivery | 100 | 0 | 0 | 11 | 65 | 140 | 223 | 308 | 388 | 448 | 468 | 438 |
Normal production | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 | 90 |
Holding inventory | 15 | 65 | 140 | 223 | 308 | 188 | 448 | 408 | 438 | 348 | ||
Units shortage | 10 | 30 | ||||||||||
Level strategy cost | ||||||||||||
Normalproduction | 36,000 | 36,000 | 34,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 | 36,000 |
Holding cost | 0 | 0 | 450 | 1950 | 4,200 | 6090 | 9240 | 11640 | 13,440 | 14040 | 13140 | 10440 |
Total cost | 36,000 | 36,000 | 34,450 | 37,950 | 40,200 | 42,090 | 41,240 | 47,640 | 49,440 | 50,040 | 49140 | 46,440 |
Total cost 517,230The total cost using level strategy is $517,230 Following is the step wise calculation of chase strategy
(Note − units in 1,000 liters)
Following is the Overtime cost
Overtime cost = Normal production cost + Normal production cost
Overtime cost = 400 + 400
Overtime cost = 400 + 80
Overtime cost = $480
Following is the Undertime cost
Undertime cost = Normal production cost + Normal production cost
Undertime cost = 400 + 400
Undertime cost = 400 + 48
Undertime cost = $448
Following is the calculation of chase strategy
Chase Strategy
I | F | M | A | M | I | J | A | S | O | N | D | |
Demand | 200 | 120 | 75 | 40 | 15 | 7 | 5 | 10 | 30 | 70 | 120 | 180 |
On-handDelivery | 100 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
Normal production | 90 | 90 | 75 | 40 | 915 | 7 | 5 | 10 | 30 | 70 | 90 | 90 |
Holding inventory | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - | - | ||
Units shortage | 10 | 30 | 30 | 90 | ||||||||
Chase strategy cost | ||||||||||||
Normalproduction | 36,000 | 36,000 | 30,000 | 16,000 | 6,000 | 2,800 | 2,000 | 4,000 | 12,000 | 28,000 | 36,000 | 36,000 |
Holding cost | 4,800 | 14,400 | 7,200 | 24,000 | 36,000 | 39,840 | 40,800 | 38,400 | 28,800 | 9,600 | 14,400 | 41,200 |
Total cost | 40,800 | 50,400 | 37,200 | 40,000 | 42,000 | 42,680 | 42,800 | 42,400 | 40,800 | 37,600 | 50,400 | 79,200 |
Chase strategy
I | F | M | A | M | I | J | A | S | O | N | D | |
Demand | 200 | 120 | 75 | 40 | 15 | 7 | 5 | 10 | 30 | 70 | 120 | 180 |
On-handDelivery | 100 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - |
Normal production | 90 | 90 | 75 | 40 | 915 | 7 | 5 | 10 | 30 | 70 | 90 | 90 |
Holding inventory | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - | - | ||
Units shortage | 10 | 30 | 30 | 90 | ||||||||
Chase strategy cost | ||||||||||||
Normalproduction | 36,000 | 36,000 | 30,000 | 16,000 | 6,000 | 2,800 | 2,000 | 4,000 | 12,000 | 28,000 | 36,000 | 36,000 |
Holding cost | 4,800 | 14,400 | 7,200 | 24,000 | 36,000 | 39,840 | 40,800 | 38,400 | 28,800 | 9,600 | 14,400 | 41,200 |
Total cost | 40,800 | 50,400 | 37,200 | 40,000 | 42,000 | 42,680 | 42,800 | 42,400 | 40,800 | 37,600 | 50,400 | 79,200 |
Total cost = 5,46,240
The total cost using chase strategy is $546,240.
It is recommended for the company to use level strategy as its cost are less compared to chase strategy.
Want to see more full solutions like this?
Chapter 13 Solutions
OM (with OM Online, 1 term (6 months) Printed Access Card)
- Assessing Leadership Ethics and Cross-cultural DiversityProvide the below with in-cite text referencing:- Investigate ethical issues and how they influence diversity and cross-cultural leadership.• Develop an ethical decision-making model that addresses cross-cultural concerns in emerging markets, such as Africa.· Conduct comprehensive analysis and modelling if necessary.- Provide a thorough ethical analysis that considers cross-cultural issues.· Careful evaluation of potential outcomes.- The proposed ethical decision-making technique is both novel and defendable.· Promoting diversity and recognising cross-cultural differences.arrow_forwardNeed help, have no idea where to start and love help upon a paper idea with no AI and soemthing original please.arrow_forwardAbout the Assignment In this course, you learned how a business chooses a positioning strategy in the marketplace and focuses on these areas by evaluating management's use of production types, creating effective productivity, and analyzing the competitiveness of production. Now you will choose a retail organization and propose a positioning marketing strategy that analyzes the organizational management decisions related to any competitiveness of cost, quality, flexibility, speed, innovation, and/or service. Prompt Choose an organization that focuses on one of these areas in the market: competitiveness of cost, quality, flexibility, speed, innovation, and/or service. An example would be choosing ALDI or LIDL. Their cost marketing positioning strategy is providing customers with international goods for a lower price and, in turn, saving business fees by not providing bagging products for free. (This is just an example. Do not use this example for your project.) Use the following steps…arrow_forward
- Can you guys help me with this? Thank you! The project is Terminal 1 at JFK International Airport Here's what need to do: Time Content: What was the estimated time of the project; what was the final time (or the estimated date) of the project; what are the major contributing factors for the disparity? (Please make sure all the information here can be present around 2 minutes) Risk management content: Discuss a major risk management event that affected the project. while researching if any team member finds an interesting risk management event *Include sources that you have the information when go over these 2 parts above.arrow_forwardI only need help with part C. Please and thank you :) ANSWERED: Gracie recorded the following times assembling a watch. Performance rating given is 95%. A) Average time of Gracie for the Operation? (round to three decimal places) ANSWER=0.107 B) normal time for this operation? (round to three decimal places) ANSWER=0.102 C) HELP PLEASE. "For a given personal allowance of 8% the standard time for the operation is how many minutes?" (round your answer to three decimal places)arrow_forwardGracie recorded the following times assembling a watch. Performance rating given is 95%. Average time of Gracie for the Operation? (round to three decimal places) normal time for this operation? (round to three decimal places)arrow_forward
- As stated before, the key advantage of the LLC is its limited liability that’s provided. When it comes to financial problems faced in their business, the LLC helps to cover the owner's personal assets, like his home or savings. Although this sounds amazing it is important to not that this is not always absolute. This being said, it’s very crucial that the owner should properly keep their finances – personal and business- separate. This will ensure that the legal protection is useful. Disadvantageously, the owner will still have to contribute to Social Security and Medicare Self-emplyment tax?arrow_forwardMonczka Trent shipping is the logistics vendor for Handfield Manufacturing in Ohio. Handfield has daily shipments of a power steering pump from its Ohio plant to an auto assembly line in Alabama. The value of the standard shipment is $261,090. Monczka Trent has two options: (1) it's standard two day shipment or (2) a subcontractor who will team drive overnight with an effective delivery of one day. The extra driver costs $190. Handfield's holding cost is 35% annually for this kind of inventory. A) _ is more economical, with a daily holding cost of _?B) What production issues are not included in the data presented?arrow_forwardSasha is a loan processor for a bank. She's been timed performing four work elements. The allowances for tasks such as this are personal, 7%; fatigue. 8%; fatigue, and delay of 2%. The normal time for the complete operation = (round your irresponsive two decimal places) Standard time for this process = (round your response to 2 decimal places)arrow_forward
- agree or disagree with post The tripartite model of culture is based on three cultural prototypes, face, dignity, and honor that represent negotiators’ self-views and are highly correlated with particular geographic regions. According to Vaughn (2023), “face cultures highly value maintaining social harmony and avoiding public embarrassment. People in these cultures are sensitive to the impact of their actions and words on their own and others’ social standing” (p. 1). An example of this in certain societies would be known as losing face. With respect to dignity, “dignity cultures derive self-worth from a sense of inherent human dignity and individual autonomy. Rooted in the concept of intrinsic worth unaffected by external factors, these cultures emphasize personal rights, equality, and respect for all individuals” (Vaughn, 2023, p. 1). An example of this in certain societies would be losing your self-worth. Lastly, in discussing honor cultures, it “links an individual’s self-worth…arrow_forwardCan you explain the process for solving this general accounting question accurately?arrow_forward1) Read “Walmart Focuses on its Supply Chain” (page 670 in the text) and answer the following questions: a) What improvements has Walmart made to its supply chain system? b) What competitive advantages might Walmart have over Amazon? 2) View the YouTube video How the Mumbai Dabbawalas Work? (3.16 minutes, Ctrl + Click on the link, there are also many longer video clips available on the Internet) and answer the following questions: https://www.youtube.com/watch?v=KDD32skx-zM a) How do the Mumbai Dabbawalas achieve their high service performance? What factors facilitate the success of their distribution network? b) If you want to “modernize” the dabbawalla distribution network, what changes (and why) will you make to the system? a) Retail outlets that do not have an internet presence often complain that consumers come in to “kick the tires,” but then buy online from a competitor. Can you suggest some ways outlets can overcome this challenge? b) Some customers of…arrow_forward
- MarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational PublishingPractical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
- Management, Loose-Leaf VersionManagementISBN:9781305969308Author:Richard L. DaftPublisher:South-Western College Pub


