Subcontracting to absorb demand fluctuations

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Reference no: EM132266137

Binford Tools manufactures garden tools. It uses inventory, overtime, and subcontracting to absorb demand fluctuations. Expected demand, regular and overtime production capacity, and subcontracting capacity are provided in the following table for the next four quarters for its basic line of steel garden tools:

Regular Overtime Subcontracting

Quarter Demand Capacity Capacity Capacity

1 9,000 9,000 1,000 3,000

2 12,000 10,000 1,500 3,000

3 16,000 12,000 2,000 3,000

4 19,000 12,000 2,000 3,000

The regular production cost per unit is $20, the overtime cost per unit is $25, the cost to subcontract a unit is $27, and the inventory carrying cost is $2 per unit. The company has 300 units in inventory at the beginning of the year. Determine the optimal production schedule for the four quarters to minimize total costs.

Please do in excel and show all the formulas. it is the 3rd time i am posting this question.

Reference no: EM132266137

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