Question 7 Use the table below to answer the following question(s). Letherin Hides is a company that makes boots specifi

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Question 7
Use the table below to answer the following question(s).
Letherin Hides is a company that makes boots specifically
targeting college students. Forecasts of sales for the next year
are 200 in the summer, 550 in the autumn, and 500 in the winter.
Accessories that are used on the boots are purchased from a
supplier for $31.66. The cost of capital is estimated to be 24% per
year (or 6% per quarter); thus, the holding cost per item is
0.06($31.66) = $1.9 per quarter (rounded figure). Letherin Hides
hires freelance art designers at part-time to craft designs during
the summer, and they earn $6 per hour. In the autumn, labor is more
difficult to keep, and the owner must pay $6.5 per hour to retain
qualified help. Because of the high demand for part-time help
during the winter holiday season, labor rates are higher in the
winter, and workers earn $7.75 per hour. Each boot design takes 2
hours to complete. How should production be planned over the three
quarters to minimize the combined production and inventory holding
costs?
The table below provides information on Letherin Hides boot design
cost and production.
Letherin Hides ​ ​
​
​ ​ ​ ​
Data ​ ​
​
​ ​ ​ ​
​ Summer Autumn
Winter
Unit Production Cost 12
13 15.5
Unit Inventory Holding Cost 1.9
1.9 1.9
Demand 200 550
500
Use a linear optimization model based on the data to answer the
following questions.
According to the linear optimization model, what is the total
cost for the summer?
$2,450
$2,000
$2,400
$2,500