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Mary Rhodes, operations manager at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming stock out cost lost sales of
Mary Rhodes, operations manager at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming stock out cost lost sales of $125 per unit, inventory carrying cost of $25 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis: Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 unit per month and subcontract additional units at a $70 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all response as whole numbers). Total cost, excluding normal time labor cost, for plan A = $ . (Enter your response as a whole number.) Plan B: Vary the workforce, which performs at a current production level of 1,300 units per month. The cost of hiring additional workers is $30 per unit produced. The cost of layoffs is $65 per unit cut back. (Enter all responses as whole numbers)
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