The total subcontracting cost = $ The total inventory holding cost for January through August = $ (Enter your response as a whole number.) The total cost, excluding normal time labor costs, for Plan E = $. (Enter your response as a whole number.) (Enter your response as a whole number.)
The total subcontracting cost = $ The total inventory holding cost for January through August = $ (Enter your response as a whole number.) The total cost, excluding normal time labor costs, for Plan E = $. (Enter your response as a whole number.) (Enter your response as a whole number.)
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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Transcribed Image Text:The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows:
May
2,100
January
February
1,450
1,700
1,700
June
2,300
July
1,900
March
April
1,700
August
1,300
Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $65 per unit. Inventory holding cost is $25 per unit per
month. Ignore any idle-time costs. Evaluate the following plan.
This exercise contains only Plan E.
Plan E: Keep the current workforce, which is producing 1,600 units per month, and subcontract to meet the rest of the demand. Subcontract cost is $75 per unit.
Month
10 December
1 January
2 February
3 March
4 April
5 May
6 June
7 July
8 August
Demand
1,450
1,700
1,700
1,700
2,100
2,300
1,900
1,300
Production
(Units)
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
Plan E
Ending
Subcontract (Units) Inventory
200
The total subcontracting cost = $
(Enter your response as a whole number.)
(Enter your response as a whole number.)
The total inventory holding cost for January through August = $
The total cost, excluding normal time labor costs, for Plan E = $. (Enter your response as a whole number.)
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