The forecasted demand, production and subcontracting capacities, and costs for the next four quarters are as follows:

There is an initial inventory of 20 units, and it costs $5 per quarter to hold one unit in inventory. Customers will be backordered, but there is a loss-of-goodwill cost of $25 per unit per quarter.

(a) Using the transportation tableau method of developing a production plan, apply the following rules to obtain two feasible solutions.

1)North-west corner rule.

2)Least Unit Cost rule.

(b) Which of these plans do you suggest?
 

Quarter Demand (units) Production capacity (units) Subcontracting capacity (units) Production cost (S/unit) Subcontracting cost ($/unit) 1 86 60 40 200 210 220 280 2 3 135 128 70 60 40 40 230 300 4 59 55 40 220 280