Answer Happy

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,200 May 2,300 February 1,600 June 2,100 1,700 July 1,700 March April 1,700 August 1,400 Her operations manager is considering a new plan, which begins in January with 200 units on hand and ends with zero inventory. 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 B. Plan B: Produce at a constant rate of 1,200 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $75 per unit. Subcontracting capacity is limited to 1,100 units per month. Evaluate this plan by computing the costs for January through August. In order to arrive at the costs, first compute the ending inventory and subcontracting units for each month by filling in the table below (enter your responses as whole numbers). Ending Subcontract Inventory Units Production Period Month Demand 0 December 200 1 January 1,200 1,200 2 February 1,600 1,200 3 March 1,700 1,200 4 April 1,700 1,200 5 May 2,300 1,200 6 June 2,100 1,200 July 1,700 1,200 August 1,400 1,200 7 8