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LMNO Gaskets has formulated a production plan for a product to meet demand over the upcoming four quarters. Demand in each of the four quarters
LMNO Gaskets has formulated a production plan for a product to meet demand over the upcoming four quarters. Demand in each of the four quarters and production, overtime, and subcontracting capacities are reported in the table below, in addition to the feasible production plan. The relevant costs are:
- Regular time production cost is $10/unit.
- Overtime production cost is $14/unit.
- Subcontracting cost is $20/unit.
- Inventory is held at a cost of $2/unit/quarter.
- Units may be backordered at a cost of $4/unit/quarter.
What is the inventory cost for the year? What is the backorder cost for the year? What is the total overtime production cost for the year? What is the total cost for the year?
\begin{tabular}{||c|c|c|c|c||} \hline \multirow{2}{*}{\begin{tabular}{c} Production \\ Resource \end{tabular}} & \multicolumn{2}{|c|}{ Demand in Quarter } & \multirow{2}{*}{ Capacity } \\ \cline { 2 - 5 } & Q1 & Q2 & Q3 & \\ \hline \hline Regular Time Q1 & 550 & 0 & 0 & 550 \\ \hline \hline Overtime Q1 & 210 & 40 & 0 & 250 \\ \hline \hline Subcontract Q1 & 0 & 0 & 0 & 650 \\ \hline \hline Regular Time Q2 & 0 & 550 & 0 & 550 \\ \hline \hline Overtime Q2 & 0 & 250 & 0 & 250 \\ \hline \hline Subcontract Q2 & 0 & 635 & 15 & 650 \\ \hline \hline Regular Time Q3 & 50 & 0 & 500 & 550 \\ \hline \hline Overtime Q3 & 30 & 40 & 170 & 250 \\ \hline \hline Subcontract Q3 & 0 & 0 & 0 & 650 \\ \hline \hline Demand in Quarter & 840 & 1515 & 685 & \\ \hline \hline \end{tabular}Step by Step Solution
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