Create a minimum cost chase plan for the forecast shown in the table. There is no beginning inventory and regular production capacity is 350 units
Overtime costs $20 extra and is limited to 50 units per month and subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40 per unit and there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in inventory. What is the total plan cost?
Month Forecast Regular Overtime Subcontracting Ending Inventory
January 250
February 400
March 500
April 350
What will be an ideal response?
Answer: Total cost for this chase plan is 50($20) + 150($15) = $3250
Month Forecast Regular Overtime Subcontracting Ending Inventory
January 250 250 0
February 400 350 50 0
March 500 350 50 100 0
April 350 350 0
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