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The Porter Company produces messenger bags. Porter must decide how many bags to produce each month. The company will use a 6-month planning horizon. The
The Porter Company produces messenger bags. Porter must decide how many bags to produce each month. The company will use a 6-month planning horizon. The forecasted monthly demands for the next six months are 10,000, 15,000, 30,000, 35,000, 25,000, and 10,000. Porter wants to meet these demands on time, knowing that it currently has 5000 bags in inventory and that it can use a given month's production to help meet the demand for that month. Assume that production occurs during the month, and demand occurs at the end of the month. During each month there is enough production capacity to produce up to 30,000 bags, and there is enough storage capacity to store up to 10,000 bags at the end of the month, after demand has occurred. The forecasted production costs per bag for the next six months are $12.50, $12.55, $12.70, $12.80, $12.85, and $12.95, respectively. The holding cost incurred per bag held in inventory at the end of any month is 5% of the production cost for that month. (This cost includes the cost of storage and also the cost of money tied up in inventory.) The selling price for bags is not considered relevant to the production
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