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The S&OP team at Kansas Furniture, led by David Angelow, has received estimates of demand requirements as shown in the table. Assuming one-time stockout
The S&OP team at Kansas Furniture, led by David Angelow, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $100 per unit, inventory carrying costs of $20 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis Plan A: Produce at a steady rate (equal to minimum requirements) of 1,200 units per month and subcontract additional units at a $65 per unit premium cost. Subcontracting capacity is limited to 500 units per month. (Enter all responses as whole numbers). Month 1 July Demand 1200 Ending Subcontract Production Inventory (Units) 1,200 0 2 August 1300 1,200 3 September 1200 1,200 1700 1,200 0 1650 1,200 6 December 1650 1,200 0 ETTTT 4 October 5 November The total cost, excluding normal time labor costs, for Plan A =S = $(Enter your response as a whole number) Plan B: Vary the workforce to produce the prior month's demand. Demand was 1,300 units in June. The cost of hiring additional workers is $35 per unit produced. The cost of layoffs is $60 per unit cut back. (Enter all responses as whole numbers.) Note: Both hinng and layoff costs are incurred in the month of the change (ie, going from production of 1,300 in July to 1200 in August requires a layoff (and related costs) of 100 units in August). The total hiring cost = S (Enter your response as a whole number.) The total layoff cost = $(Enter your response as a whole number.) The total inventory carrying cost = $ (Enter your response as a whole number.) Hire Layoff Month 1 July Demand 1200 Production (Units) (Units) Ending Inventory Stockouts (Units) 2 August 1300 3 September 1200 4 October 1700 5 November 1650 6 December 1650 The total stockout cost = $(Enter your response as a whole number) The total cost, excluding normal time labor costs, for Plan B = $(Enter your response as a whole number.)
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