Using subcontracting for additional units

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Reference no: EM1339637

Q1) Firm X (from the previous question) would like to consider other aggregate planning options. Plan B involves producing at a level production rate of 1,400 units per month. This should meet minimum monthly demands. If additional units are needed, use subcontracting to make them. Evaluate Plan B.

True of False

1.In a level production strategy, the demand to be met by production in January would be adjusted to only 1,200 units due to the beginning inventory.

2.Total cost of carrying inventory for Plan B is $4,000.

3.Cost of subcontracting in February is $15,000.

4.Cost of subcontracting in March is $30,000.

5.From a cost standpoint, this plan is preferrable to Plan A.

Reference no: EM1339637

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