Problem 13-3 The Johnson Company manufactures expensive medical diagnostic equip
ID: 335172 • Letter: P
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 540 units/quarter. Production costs are $23,500 per unit and holding costs are $1,600 per quarter per unit. Assume no on-hand inventory exists at the beginning of Quater 1 Demand 320 650 650 540 a. Find the regular production and ending inventory. (Leave no cells blank be certain to enter "O" wherever required.) Quarter Demand 320 650 650 540 2.160 Total b. What is the cost of this production plan? costExplanation / Answer
The production and inventory levels are filled above in table.
Total cost of this production plan = production cost + inventory cost
production cost is 23500 per unit
total production cost = 23500*2160 = 50760000
total inventory 330 per quarter
total inventory cost = 330*1600 = 528000
total cost = 50760000 + 528000 = 51288000
Quarter Demand Regular Production Endign Inventory 1 320 540 220 2 650 540 110 3 650 540 0 4 540 540 0 Total 2160 2160 330