Reference no: EM131782999

Lavare, located in the Chicago suburbs, is a major manufacturer of stainless steel sinks. Lavare is in the middle of the demand and supply planning exercise for the coming year. Anticipated monthly demand from distributors over the 12 months is shown in Table below Month Month # Demand January 1 12,000 February 2 14,000 March 3 14,000 April 4 18,000 May 5 19,000 June 6 20,000 July 7 22,000 August 8 27,000 September 9 30,000 October 10 28,000 November 11 14,000 December 12 11,000 Capacity at Lavare is governed by the number of machine operators it hires. The firm works 20 days a month, with a regular operating shift of eight hours per day. Any time beyond that is considered overtime. Regular-time pay is $15 per hour and overtime is $22 per hour. Overtime is limited to 20 hours per month per employee. The plant currently has 250 employees. Each sink requires two hours of labor input. It costs $3 to carry a sink in inventory for a month. Materials cost per sink is $40. Sinks are sold to distributors at a price for $125 each. We assume that no stockouts are allowed and the starting inventory entering January is 5,000 units and the desired ending inventory in December is also 5,000 units. (Use a separate Worksheet on SAME File!!,) Market research has indicated that a promotion dropping prices by 5 percent in a given month will increase sales in that month by 15 percent and bring forward 20, 15, and 10 percent demand from each of the following three months. What is the optimal production plan for the year if we assume no promotions? What is the annual profit from this plan? What is the cost of this plan? Is it better to promote in: – July or September? How much increase in profit can be achieved as a result? If sinks are sold for $250 instead of $125, does the decision about the timing of the promotion change? Why? HINT: Use One Excel File and the SOLVER.