CHASE DEMAND STRATEGY

Consider the situation faced by Golden Beverages, a producer of two major products Old Fashioned and Foamy Delite root beers. Golden Beverages operates as a continuous flow factory and must plan future production for a demand forecast that fluctuates quite a bit over the year, with seasonal peaks in the summer and winter holiday season. How should Golden Beverages plan its overall production for the next 12 months in the face of such fluctuating demand if the chase demand strategy is applied? The data has been collected in the Microsoft Excel Online file below.

Spreadsheet:

Aggregate Planning:	Chase Demand Strategy
Production cost ($/unit)	$70.00
Inventory holding cost ($/unit)	$1.40
Lost sales cost ($/unit)	$100.00
Overtime cost ($/unit)	$6.80
Undertime cost ($/unit)	$2.90
Rate change cost ($/unit)	$5.10
Normal production rate (units)	2,300
Ending inventory (previous Dec.)	1,100
Month	Demand
January	1,700
February	1,300
March	2,300
April	2,900
May	3,200
June	3,500
July	3,700
August	3,600
September	2,600
October	1,500
November	2,300
December	2,800

1. What is the average monthly demand? Round your answer to two decimal places.

a. What is the maximum monthly ending inventory? Round your answer to the nearest whole number.

b. What are the costs associated with chase demand production plan? Round your answers to the nearest cent.

	Production	Inventory	Lost Sales	Overtime	Undertime	Rate Change
Month	Cost	Cost	Cost	Cost	Cost	Cost
Totals

c. What is the total cost? Round your answer to the nearest cent