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The Kansas Furniture PVYO team received the following estimate of requirements of demand: Jul. 1400 Aug. 1600 Sep, 1500 Oct 800 Nov. 1600 Dic. 1500

The Kansas Furniture PVYO team received the following estimate of requirements of demand:

Jul.

1400

Aug.

1600

Sep,

1500

Oct

800

Nov.

1600

Dic.

1500

Assuming stockout costs for lost sales are $100 per unit, carrying costs are $25 per unit per month, and ending inventory is nil, evaluate these two plans based on incremental costs. Outsource additional units at an extra cost of $30 per unit, although only about 150 units can be outsourced. The company produced 1,300 units in June. The cost of hiring additional workers is $3,000 per 100 units produced. Layoff cost is $6,000 for 100 fewer units. Regular time cost equals $30 per unit

Note: In the month of the change, both hiring and firing costs are incurred; that is, going from a production of 1,300 in July to 1,000 in August requires layoffs (and their related costs) of 300 units in August; in the same way that when going from a production of 1,000 in August to 1,200 in September, hiring (with their related costs) of 200 units is required in September

A maximum of 20% overtime is allowed at a surcharge of $40 per unit. Assume that warehouse limitations do not allow more than 70 units to be stored from one month to the next.

Identify an optimal strategy. Consider the following questions:

1. How much is the total cost of an optimal proposal?

2. If you get another subcontract provider, what is the least the provider should offer you to use in any one month?

3. How many idle hours would have to be paid to execute the optimal plan?

4. What is the maximum amount that is kept in inventory?

5. How much is the maximum that the regular time payment can be increased from August to November to not change the proposed plan?

6. In what period is it convenient to increase the capacity of regular time?

7. How much will decrease by increasing 10 units of capacity in regular time for the period answered in 6?

8. In which month would an increase in demand create the least impact to total costs of the optimal plan?

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