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Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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
Transcribed Image Text:The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventory
carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:
Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional
units at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers).
Ending
Inventory
Subcontract
Month
Demand
Production
(Units)
1 July
1000
1,000
2 August
1200
1,000
3 September
1400
1,000
4
October
1800
1,000
November
1800
1,000
6.
December
1600
1,000
LO
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