Question
Bahouth Enterprises produces a variety of hookahs for clients around the globe. Their small plant has a highly flexible workforce that can switch between products
Bahouth Enterprises produces a variety of hookahs for clients around the globe. Their small plant has a highly flexible workforce that can switch between products seamlessly. They forecast using a six-month planning period and have a demand forecast as shown in the table. The per-unit costs for each output option the sales and operations planner has at his disposal are indicated in the table. Regular output costs $40 per unit, overtime production is $60 per unit, and subcontracting is $70 per unit. Holding inventory from one month to the next costs $2 per unit per month and a backlog costs $5 per unit per month. Regular plant capacity is 300 units per month.
The plant has no limits on the number of units produced by overtime or subcontractors and adopts a chase plan strategy for the six-month planning period. What is the cost for month 6 of their chase plan?
\begin{tabular}{|l|c|c|c|c|c|c|c|c|} \hline Period & & 1 & 2 & 3 & 4 & 5 & 6 & Total \\ \hline Forecast & & 400 & 350 & 500 & 400 & 500 & 200 & 2,350 \\ \hline Output & & & & & & & & \\ \hline Regular & $40 & & & & & & & 1,800 \\ \hline Overtime & $60 & & & & & & & 0 \\ \hline Subcontract & $70 & & & & & & & 0 \\ \hline Inventory & & & & & & & & \\ \hline Beginning & & 0 & & & & & & \\ \hline Ending & $2 & & & & & & & \\ \hline Average & & & & & & & & 0 \\ \hline Backlog & $5 & & & & & & & 2,250 \\ \hline Costs & & & & & & & & \\ \hline \end{tabular}Step by Step Solution
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