Question

A company currently has no items in inventory. The demand for the next four months is 200, 400, 250, and 350 units. Determine the monthly production rate if a level strategy is selected with the goal of ending the fourth month with 100 units in inventory.

Answer 1

325 units per month

Step-by-step explanation:

Cumulative demand for next four months:

= 200 + 400 + 250 + 350

= 1,200

Total production requirement :

= Cumulative demand for next four months - Beginning inventory + Ending inventory

= 1,200 - 0 + 100

= 1,300

At level strategy, monthly production rate will be uniformly.

Therefore,

the monthly production rate will be as follows:

= 1,300 ÷ 4

= 325 units per month