Question
A flower store usually gains more profit as it gets close to Valentine's Day. This year, they want to use a chase strategy to determine
A flower store usually gains more profit as it gets close to Valentine's Day. This year, they want to use a chase strategy to determine the number of flower bundles that they need to make. Consider using regular production, overtime production, and subcontracting (not necessarily all of them) to satisfy demand. The demand forecasts are 30 bundles for Feb 11th; 40 bundles for Feb 12th; 55 bundles for Feb 13th; and 100 bundles for Feb 14th. Regular production capacity is 40 bundles/day, and overtime production capacity is 30 bundles/day. There is no constraint on the capacity of subcontracting. Cost is $8/bundle for regular time production, $10/bundle for overtime production, and $12/bundle for subcontracting. The inventory cost is $5/bundle/day on average inventory, and the backlog cost is $10/bundle/day. The beginning inventory for the first period is zero. The ending inventory for the last period should be zero.
Develop an aggregate production plan using a chase strategy (with the goal of minimizing the total cost). Based on the chase strategy, what is the total cost (that includes all types of production)?
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