Answered: July Aug. Sept. Oct. Nov. Dec. 1,000…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Related questions

Question

The S&OP team at Ka nsas Furniture has received the
fo llowing estimates of demand requirements: a) Assuming one-time 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 these two plans
on an incremental cost basis:
• Plan A: Produce at a steady rate (equal to minimum requirements)
of I ,000 units per month and subcontract additional
units at a $60 per unit premium cost.
• Plan B: Vary the workforce, to produce the prior month's
demand. The fi rm produced I ,300 units in June. The cost of
hiring additional workers is $3,000 per 100 units produced.
The cost of layoffs is $6,000 per l 00 units cut back.
Nore: Both hiring and layoff costs are incurred in the month of the
change, (i.e., going from production of I ,300 in July to 1,000 in
August requires a layofT [and related costs] of 300 units in August,
j ust as going from production of I ,000 in A ugust to 1,200 in September
requires hiring [and rela ted costs] of200 units in September).
b) Which plan is best and why?