Mondo Motorcycles Quarter 1 2 3 4

Demand 40 70 50 20

Manufacturing Cost = $400/unit

Holding Cost = $100/unit/period

Cost of increasing production from one period to next= $700/unit

Cost of decreasing production from one period to next =$600/unit

Other Information

1. All demands must be met on time 2. A quarters production may be used to meet demand for

that quarter.

3. Production preceding quarter 1 = 50

4. Initial inventory = 0.

Suppose that Mondo no longer must meet demands on time. For each quarter that demand for a motorcycle is unmet, a penalty or shortage cost of $120 per motorcycle short is accessed. Thus, demand can now be backlogged. All demands must be met however, by the end of quarter 4.

a) Modify the formulation of the Mondo problem to allow for backlogged demand.

b) Solve problem using Excels Solver

(Hint: Unmet demand corresponds to i_t0. Thus i_t is urs, and we must substitute

i_t =i'_t - i''_t. Now i''_t will be the amount of demand unmet at the end of quarter t.)