Break up into setup cost and inventory holding cost

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The Harmon Music Company produces a variety of instruments. Because the company is small it would like to minimize the amount of money tied up in inventory by matching production iwth demand. ONe of the instruments produced is the model 85C trumpet which retails for $400. Based on orders from music stores around the country and online sales, the anticipated demands for an eight period planning horizon are 52, 42, 32, 12, 26, 82, 45, 14. Current starting inventory of 85C trumpets is 10 units (Assume all costs for this inventory havev already been paid). Assume that h = $1/unit, period and A=$100/order.

A) Find the optimal production schedule (production order quantities for 85C trumpets over the next eight periods) using the Wagner - Whitin Dynamic Lot sizing method. Calculate the corresponding optimal cost over the planning horizon and its break up into setup cost and inventory holding cost.

B) How wouoldl you update the wagner whitin dynamic lot sizing logic to incorporate production capacity constraints in each time period. Assume that at most 100 units can be produced in each period. How would the optimal production plan for the above problem change or what might be the new optimal production plan.

Reference no: EM131228607

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