Deforrest Marine Motors manufactures engines for the speedboat racing circuit. As part of their annual planning cycle, they forecasted demand for the next four quarters. The number of available days of production and the anticipated demand are given below. Q1 Q2 Q3 Q4
Days of Production 65 68 61 64
Demand 1,800 2,200 1,700 2,400
They also estimated many of the costs required to conduct operations planning. Some of these key figures are listed below.
Employees 30 Hire Cost $1,200/employee
Production Rate 1 unit/employee/day Fire Cost $800/employee
Production Cost $1,000/unit Subcontracting Cost $1,800/unit
Backorder Cost
$200
Subcontracting Limit
400 units maximum
Overtime Cost
$1,500
Inventory Cost
$100/unit/quarter
Overtime Limit
<= 25% of Reg. Production
Initial Inventory 280 units
1. Given the assumption that Deforrest Marine Motors will maintain the same number of employees (30 employees) for the entire year, what would be the production for the first quarter?
2. Given that the beginning inventory (start of Q1) was 280 units, what would be the average on-hand inventory for the first quarter?
3. What would be the total on-hand average inventory holding cost for the four quarters?
4. What was the total cost of producing products across the four quarters?
5. What was the total cost of backordering across the four quarters?