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The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,100


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The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,100 February 1,500 June 2,300 March April 1,600 1,900 July August 1,900 1,400 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $65 per unit. Inventory holding cost is $25 per unit per month. Ignore any idle-time costs. Evaluate the following plans D and E. Plan D: Keep the current workforce stable at producing 1,600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less. Note: Do not produce in overtime if production or inventory are adequate to cover demand. Plan D Month Demand Production (Units) O.T. Production (Units) Ending Inventory Stockouts (Units) 0 December 200 1 January 1,400 1,600 2 February 1,500 1,600 3 March 1,600 1,600 4 April 1,900 1,600 5 May 2,100 1,600 6 June 2,300 1,600 7 July 1,900 1,600 8 August 1,400 1,600 The total overtime production cost = $ (Enter your response as a whole number.) The total inventory holding cost for January through August = $ (Enter your response as a whole number.) The total stockout cost = $ (Enter your response as a whole number.) The total cost, excluding normal time labor costs, for Plan D = $ . (Enter your response as a whole number.) Plan E: Keep the current workforce, which is producing 1,600 units per month, and subcontract to meet the rest of the demand. Subcontract cost is $75 per unit. Subcontracting capacity is limited to 700 units per month. The warehouse and overtime constraints from Plan D do not apply to this plan. The total subcontracting cost = $ (Enter your response as a whole number.) Plan E Production Ending Month Demand (Units) Subcontract (Units) Inventory 0 December 200 1 January 1,400 1,600 2 February 1,500 1,600 3 March 1,600 1,600 4 April 1,900 1,600 5 May 2,100 1,600 6 June 2,300 1,600 7 July 1,900 1,600 8 August 1,400 1,600 The total inventory holding cost for January through August = $ The total cost, excluding normal time labor costs, for Plan E = $ (Enter your response as a whole number.) . (Enter your response as a whole number.)

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