Question
Lifetime has collected demand forecasts for its kayaks in Table 2. They would like to compare the total cost of two plans: 1) A chase
Lifetime has collected demand forecasts for its kayaks in Table 2. They would like to compare the total cost of two plans: 1) A chase strategy using hires/layoffs with no inventory and backorders; and 2) A Level strategy using inventory and backorders. To help with the comparison, they have obtained other relevant costs and production information in Table 1. They will start the planning horizon with 0 units in initial inventory. Assume all backorders accumulate.
Parameter | Value |
---|---|
Previous Month's (Month 0) Production in units | 1400 |
Production cost per unit | $190 |
Hiring cost per unit | $50 |
Layoff cost per unit | $90 |
Cost of holding inventory per unit per month | $50 |
Cost of a backorder per unit per month | $90 |
Month | Demand |
---|---|
1 | 800 |
2 | 1600 |
3 | 3100 |
4 | 4600 |
5 | 4000 |
6 | 2500 |
Compute the total cost of production for the Level Strategy that produces 2570 units each period.
Enter your final answer rounded to the nearest tenth of a dollar.
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