The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventorycarrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additionalunits at a $60 per unit premium cost. Subcontracting capacity is limited to 800 units per month. (Enter all responses as whole numbers).EndingInventorySubcontractMonthDemandProduction(Units)1 July10001,0002 August12001,0003 September14001,0004October18001,000November18001,0006.December16001,000LO

Inventory is the stock, items, and raw material that the company stores in the warehouse to use in…

Answered: The S&OP team at Kansas Furniture, has…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventory carrying costs of $20 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis: Plan A: Produce at a steady rate (equal to minimum requirements) of 1,200 units per month and subcontract additional units at a $60 per unit premium cost. Subcontracting capacity is limited to 500 units per month. (Enter all responses as whole numbers). Month Demand Production Ending Inventory Subcontract (Units) 1 July 1200 1,200 0 Insert 2 August 1300 1,200 0 Insert 3 September 1200 1,200 0 Insert 4 October 1700 1,200 0 Insert 5 November 1650 1,200…
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,100 February 1,700 June 2,100 March 1,600 July 1,700 April 1,900 August 1,500 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $60 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. Evaluate the following plans D and E. Plan D: Keep the current workforce stable at producing 1,600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less. Note: Do not produce in overtime if production or inventory are adequate to cover demand.…
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,200 February 1,600 June 2,200 March 1,800 July 1,800 April 1,800 August 1,400 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. Part 2 The average monthly demand requirement=17751775 units. (Enter your response as a whole number.) Part 3 In order to arrive at the costs, first compute the ending inventory and stockout units for each month…
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,200 February 1,600 June 2,200 March 1,800 July 1,800 April 1,800 August 1,400 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. Part 2 The average monthly demand requirement=1775 units. (Enter your response as a whole number.) Part 3 In order to arrive at the costs, first compute the ending inventory and stockout units for each month by…
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,400 May 2,200 February 1,600 June 2,200 March 1,800 July 1,800 April 1,800 August 1,400 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. Part 2 The average monthly demand requirement=1775 units. (Enter your response as a whole number.) Part 3 In order to arrive at the costs, first compute the ending inventory and stockout units for each month by…
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,500 May 2,300 February 1,700 June 2,100 March 1,700 July 1,900 April 1,700 August 1,500 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $125 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. The average monthly demand requirement=18001800 units. (Enter your response as a whole number.) In order to arrive at the costs, first compute the ending inventory and stockout units for each month by filling in…
A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 500 units per month can be used. Backorders are allowed, and they are charged at the rate of $20 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $10 per unit and beginning inventory is zero. Overtime costs $16 per unit and subcontracting costs $20 per unit. In the 4th month, overtime is not possible. While outsourcing is not possible in the 3rd month. Overtime capacity is 50 units and subcontracting capacity is 50 units. Month Forecast 1 400 2 480 3 560 4 720 5…
manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 1000 units per month can be used. Backorders are allowed, and they are charged at the rate of $8 per unit per month. Inventory holding costs are $1 per unit per month based on maximum inventory. Determine the cost of this plan if regular time cost is $20 per unit, beginning inventory is zero, and initial backlog from previous plan is 100. Month Forecast 1 800 2 100 3 1200 4 1100 5 1000 6 900 a. Prepare an aggregate plan.b. Prepare an aggregate plan if the management decided to switch to chase…
Hotel Galway is a 50 room Boutique hotel in a pop-ular city break destination in Ireland. Until recently the hotel has priced each room at $120 for bed and breakfast. On aver-age 40 rooms are occupied every weekend. The variable cost of each occupied room is $30. Following an internal review man-agement has decided to try a revenue management approach, with rooms priced at $90 for bookings up to one week early and $180 for bookings within a week of their stay. It is esti-mated the hotel will sell 28 rooms at the lower price and 14 at the higher price. Variable costs will not change. Recommendwhich approach is the most feasible.
Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: demand forecast. Quarter Forecast 1 1,900 2 1,200 3 1,600 4 800 Costs/Other Data Previous quarter's output=1,200 cases Beginning inventory=0 cases Stockout cost of backorders=$160 per case Inventory holding cost=$40 per case at end of quarter Hiring employees=$35 per case Terminating employees=$80 per case Subcontracting cost=$65 per case Unit cost on regular time=$30 per case Overtime cost=$20 extra per case Capacity on regular time=1,900 cases per quarter John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: • Plan A: a strategy that hires and fires personnel as necessary to meet the forecast. • Plan B: a level strategy. • Plan C: a level strategy that…
Mavis and John have joined forces to start M&J Food Products, a processor of packaged shredded lettuce for institutional use. John has years of food processing experience, and Mavis has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed cost of $50,000and a variable cost of $2.50 per bag. They expect to sell 75,000 bags of lettuce per month. They expect to sell the shredded lettuce for $3.25 per 5-pound bag. John and Mavis has been contacted by a vendor to consider a more mechanized process. This new process will have monthly fixed cost of $125,000 per month with a variable cost of $1.75 per bag. Based on the above scenario: Should…
Lunar Co.Ltd's estimated demand for the next 6 months in 2021 is as follows: Month Demand July 1500 August 1700 September 2000 October 1800 November 2200 December 1500 Management considers 2 aggregate plans as follows:a. Perform variations in the number of workers according to the level of demand. The current average production is 1500 units/month. Labor procurement costs $500,000 per 100 units,while the cost of reducing labor is $750,000 per 100 units. b. Keeping production levels constant at an average of 1500 units/month (to meet minimum demand) and to meet demand shortages through subcontracting at a marginal cost of $5,000 per unit. Subcontracting can only be done in a number of 500 units. Demand that cannot be met by production and subcontracting is a loss of sales and calculated at $5,000 per unit. In your opinion, as the company's operational manager, which plan should the company take (from points a & b above) so that the company can achieve production…

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