Reference no: EM13334666
Kramer Laundry Products, Inc., makes commercial and industrial laundry machines (the kinds hotels use), and has these aggregate demand requirements for the next six months. The firm has regular capacity for 200 units, and overtime capacity for 40 more. Currently, subcontracting can supply up to 100 units per month, but the subcontracting firm may soon be unavailable.
Month Demand Costs and other data
1 220 Previous output level 150 units
2 160 Beginning inventory 100 units
3 200 Stockout cost $250 per unit
4 210 Inventory holding cost $100 per unit at end of month
5 200 Unit Cost, regular time $1,200 per unit
6 190 Subcontracting $2,000 per unit
Unit Cost, overtime $1,500 per unit
Hiring workers $200 per unit
Laying off workers $500 per unit
Which is cheaper: to produce level, incurring back orders and inventory charges; or to produce a base quantity of 120, using first, overtime, then subcontracting, to meet demand? Present both solutions, then clearly state which is better and why.
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: Kramer Laundry Products, Inc., makes commercial and industrial laundry machines (the kinds hotels use), and has these aggregate demand requirements for the next six months. The firm has regular capacity for 200 units, and overtime capacity for 40 mor..
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