solution
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Manager Chris Channing of Fabric Mills, Inc., has developed the forecast shown in the table for bolts of cloth. The figures are in hundreds of bolts. The department has a normal capacity of 275(00) bolts per month, except for the seventh month, when capacity will be 250(00) bolts. Normal output has a cost of $40 per hundred bolts. Workers can be assigned to other jobs if production is less than normal. The beginning inventory is zero bolts. |
| Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Total |
| Forecast | 250 | 300 | 250 | 300 | 280 | 275 | 270 | 1,925 |
| a. |
Develop a chase plan that matches the forecast and compute the total cost of your plan. Overtime is $60 per hundred bolts.(Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.) |
| Period | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Total |
| Forecast | 250 | 300 | 250 | 300 | 280 | 275 | 270 | 1,925 |
| Output | ||||||||
| Regular | ||||||||
| Overtime | ||||||||
| Subcontract | ||||||||
| Output – Forecast | ||||||||
| Inventory | ||||||||
| Beginning | ||||||||
| Ending | ||||||||
| Average | ||||||||
| Backlog | ||||||||
| Costs: | ||||||||
| Output | ||||||||
| Regular | $ | $ | ||||||
| Overtime | ||||||||
| Subcontract | ||||||||
| Inventory | ||||||||
| Backorder | ||||||||
| Total | $ | $ | ||||||
| b. |
Would the total cost be less with regular production with no overtime, but using a subcontractor to handle the excess above normal capacity at a cost of $50 per hundred bolts? Backlogs are not allowed. The inventory carrying cost is $2 per hundred bolts.(Round your Average values to 1 decimal place. Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.) |
| Period | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Total |
| Forecast | 250 | 300 | 250 | 300 | 280 | 275 | 270 | 1,925 |
| Output | ||||||||
| Regular | ||||||||
| Overtime | ||||||||
| Subcontract | ||||||||
| Output – Forecast | ||||||||
| Inventory | ||||||||
| Beginning | ||||||||
| Ending | ||||||||
| Average | ||||||||
| Backlog | ||||||||
| Costs: | ||||||||
| Regular | $ | $ | ||||||
| Overtime | ||||||||
| Subcontract | ||||||||
| Inventory | ||||||||
| Backorder | ||||||||
| Total |
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