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.

Answer 1

700 units per month

Step-by-step explanation:

Considering the demand for the next for months and the ending inventory required for the last month, the total number of units needed is:

`U_n=500+800+900+300+400\\U_n=2900\ units`

Since the company already has 100 items in inventory, the number of total units the company should produce is:

`U_p=2900-100\\U_n=2800\ units`

The production rate for the next four months is given by:

`r=(2800)/(4)\\r= 700\ units/month`

Check if that level of production satisfies each month's demand:

`\begin{array}{cccc}\ &Required&Inventory\\month\ 1&500&800\\month\ 2&800&1000\\month\ 3&900&900\\month\ 4&300&700\end{array}`