Question

A company currently has 100 items in inventory. The demand for the next four months is 500, 800, 900, and 300 units. Determine the monthly production rate if a level strategy is selected with the goal of ending the fourth month with 400 units in inventory.

a. 500 units/monthb. 700 units/monthc. 900 units/monthd. 1100 units/month

Answer 1

The monthly production rate if a level strategy is selected with the goal of ending the fourth month with 400 units in inventory is b. 700 units/month

Step-by-step explanation:

If the company operates a level production stategy and aims to have 400 units at the ending of the fourth month, then;

Opening inventory will be 100 units and monthly movement will be as follows;

Month Opening Demand Produce Closing

1 100 -500 700 = 300

2 300 -800 700 = 200

3 200 -900 700 = 0

4 0 -300 700 = 400