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 $60 per unit premium cost. Subcontracting capacity is limited to 500 units per month. (Enter all responses as whole numbers). Month Demand Production Ending Inventory Subcontract (Units) 1 July 1200 1,200 0 Insert 2 August 1300 1,200 0 Insert 3 September 1200 1,200 0 Insert 4 October 1700 1,200 0 Insert 5 November 1650 1,200 0 Insert 6 December 1400 1,200 0 Insert The total cost, excluding normal time labor costs, for Plan A =$ (Enter your response as a whole number.)

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	0	Insert
6	December	1400	1,200	0	Insert

The total cost, excluding normal time labor costs, for Plan A =$
(Enter your response as a whole number.)

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).
Ending
Inventory
Subcontract
ETT
Month
Demand
Production
(Units)
1 July
1200
1,200
2 August
1300
1,200
3 September
1200
1,200
4
October
1700
1,200
November
1650
1,200
December
1400
1,200
The total cost, excluding normal time labor costs, for Plan A = $
|. (Enter your response as a whole number.)

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