Problem 13-3 The Johnson Company manufactures expensive medical diagnostic equip

Question

Problem 13-3 The Johnson Company manufactures expensive medical diagnostic equipment. It plans to meet all of its projected demand (given below for the next year by quarter). The firm plans to use a constant production rate of 680 units/quarter. Production costs are $27,000 per unit and holding costs are $1,750 per quarter per unit. Assume no on-hand inventory exists at the beginning of Quarter 1 Quarter1 2 3 4 Demand390 825 825 680 a. Find the regular production and ending inventory. (Leave no cells blank - be certain to enter "O" wherever required.) Regular Ending Invento Quarter Demand Production 390 825 825 680 Total 2,720 b. What is the cost of this production plan? Total cost

Explanation / Answer

Solution-

Total Production cost- $74201250

Quarter Demand Regular Production Ending Inventory Production Cost Total Holding Cost Total Cost 1 390 680 290 18360000 507500 18867500 2 825 680 145 18360000 253750 18613750 3 825 680 0 18360000 0 18360000 4 680 680 0 18360000 0 18360000 Total 2720 2720 435 73440000 761250 74201250

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