Business, 05.05.2020 22:24 pinkyglitter3308

Mary Rhodes, operations manager at Northeast Furniture, received the following demand forecast:
Jan: 1,000; Feb. 1,200; March 1,400; April 1,800; May 1,800; June 1,600
Assume stockout costs for lost sales of $100 per unit, inventory carrying costs of $25 per unit per month and zero beginning and ending inventory. Evaluate the following two plans on an incremental cost basis:
Alternative 1: Produce at a steady rate, equal to minimum requirements, of 1,000 units per month. Subcontract enough additional units, at $60 per unit premium cost, to avoid lost sales.
What is the cost of alternative 1?
What is the total holding (inventory) cost?
Alternative 2: Vary the workforce to match monthly demand. The current workforce most recently produced 1,300 units last month. The cost of hiring workers is $3,00 per 100 units of capacity increase, while firing is $6,000 per 100 units of capacity decrease.
What is the total cost of alternative 2?
How many units are produced via regular time production?
Which alternative has lower incremental cost?

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Mary Rhodes, operations manager at Northeast Furniture, received the following demand forecast: