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Firm’s Aggregate Demand Assignment | Homework For You

The president of Hill​ Enterprises, Terri​ Hill, projects the ​firm’s aggregate demand requirements over the next 8 months as​follows:  Homework For You

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January 1,400 May 2,100
February 1,500 June 2,300
March 1,600 July 1,700
April 1,900 August 1,500

Her operations manager is considering a new​ plan, which begins in January with 200 units on hand and ends with zero inventory. Stockout cost of lost sales is ​$100 per unit. Inventory holding cost is ​$25 per unit per month. Ignore any​ idle-time costs. The plan is called plan B.

Plan​ B: Produce at a constant rate of 1,400 units per​ month, which will meet minimum demands. Then use​subcontracting, with additional units at a premium price of ​$80 per unit. Subcontracting capacity is limited to 900 units per month. Evaluate this plan by computing the costs for January through August.

In order to arrive at the​ costs, first compute the ending inventory and subcontracting units for each month by filling in the table below ​(enter your responses as whole​ numbers).

Period Month Demand Production Ending Inventory Subcontract Units
0 December 200
1 January 1,400 1,400
2 February 1,500 1,400
3 March 1,600 1,400
4 April 1,900 1,400
5 May 2,100 1,400
6 June 2,300 1,400
7 July 1,700 1,400
8 August 1,500 1,400

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