Question
Suzie's Sweatshirts is a home-based company that makes upscale, hand-paintedsweatshirts for children. Forecasts of sales for the next year are 125 in the autumn, 250
Suzie's Sweatshirts is a home-based company that makes upscale, hand-paintedsweatshirts for children. Forecasts of sales for the next year are 125 in the autumn, 250 in thewinter, and 75 in the spring. Shirts are purchased for $15. The cost of capital is 24% a year (or 6% per quarter); thus the holding cost per shirt is 0.06*15 = $0.90 per quarter. Suzie hires parttime workers to paint the shirts during the autumn, and they earn $4.50 per hour. Because of thehigh demand for part time help during the winter holiday season, labor rates are higher in thewinter, and Suzie must pay the workers $6.00 per hour. In the spring, labor is more difficult tokeep, and Suzie finds that she must pay $5.50 per hour to get qualified help. Each shirt takes 1.5hours to complete. How should Suzie plan production over the three quarters to minimize thecombined production and inventory holding costs?
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