Problem 13.4 Question Help The president of Hill Enterprises, Terri Hill, projec
ID: 347879 • Letter: P
Question
Problem 13.4 Question Help The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April 1,500 1,500 1,700 1,800 May June July August 2,300 2,300 1,800 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 $125 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan B Plan B: Produce at a constant rate of 1,500 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 800 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) Ending Subcontract Units Period Month Demand Production nvento 0 December 1 Januany 200 3 March 4 April 5 May 6 June 7 July 8 August 1,500 2 February 1500 1,700 1,800 2,300 2,300 1,800 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Enter your answer in the edit fields and then click Check AnswerExplanation / Answer
Please find below the filled uptable for reference
Month
Demand
Production
Subcontracting
Ending inventory
Inventory holding cost (@$20/month)
Subcontracting cost (@$80/ unit)
Stockout cost ($125/ unit)
December
0
0
0
200
0
0
0
January
1500
1500
0
200
4000
0
0
February
1500
1500
0
200
4000
0
0
March
1700
1500
0
0
0
0
0
April
1800
1500
300
0
0
24000
0
May
2300
1500
800
0
0
64000
0
June
2300
1500
800
0
0
64000
0
July
1800
1500
300
0
0
24000
0
August
1500
1500
0
0
0
0
0
TOTAL :
8000
176000
0
Following may be noted :
Inventory holding cost = $20 x Ending inventory ( Note: No inventory holding cost for December has been assumed since we need to calculate total cost for January to August Only )
Based on above explanations , following are the total costs under different heads under various categories :
Inventory holding cost = $8,000
Subcontracting cost = $176,000
Stockout cost = 0
Cumulative cost = $8,000 + $176,000 = $184,000
CUMULATIVE COSTS JANUARY THROUGH AUGUST = $184,000
Month
Demand
Production
Subcontracting
Ending inventory
Inventory holding cost (@$20/month)
Subcontracting cost (@$80/ unit)
Stockout cost ($125/ unit)
December
0
0
0
200
0
0
0
January
1500
1500
0
200
4000
0
0
February
1500
1500
0
200
4000
0
0
March
1700
1500
0
0
0
0
0
April
1800
1500
300
0
0
24000
0
May
2300
1500
800
0
0
64000
0
June
2300
1500
800
0
0
64000
0
July
1800
1500
300
0
0
24000
0
August
1500
1500
0
0
0
0
0
TOTAL :
8000
176000
0