Question

Right now is August 1, 2020. You would like to construct an aggregate production plan for product PX27 for the

four quarters of 2021.
Cost of regular production = 65 $/u.
Cost of overtime production = 97 $/u.
Inventory holding cost = 5 $/u/qtr.
Cost of increasing regular production =
Cost of decreasing regular production =
The regular production in Quarter 4 of 2020 is 1,386 u.
The inventory a the beginning of Quarter 1 of 2021 is estimated to be 72 u.
The forecasted demand for the four quarters of 2021 are: 1,134, 1,388, 1,138, and 1,289 units.
80 $/u.
90 $/u.
You want to use the level production strategy with overtime production.
Furthermore, you will keep inventory as low as possible but stockouts (shortages) must be avoided.
Suppose you keep the quarterly regular production constant at 1,026 units and add overtime production if
necessary.
You must perform the needed calculation and answer the question shown below.
NOTE: Do not use any comma in your answers.
The total cost of overtime production is
dollars.

Answer 1

$82985

Explanation:

Based on the given information, we can calculate the total cost of overtime production.

First, let's calculate the regular production for each quarter of 2021: Quarter 1: 1,026 units Quarter 2: 1,026 units Quarter 3: 1,026 units Quarter 4: 1,026 units

Next, let's calculate the total demand for the four quarters of 2021: Total demand = 1,134 + 1,388 + 1,138 + 1,289 = 4,949 units

Since the regular production is constant at 1,026 units per quarter, we need to calculate the overtime production for each quarter: Quarter 1: 1,134 - 1,026 = 108 units Quarter 2: 1,388 - 1,026 = 362 units Quarter 3: 1,138 - 1,026 = 112 units Quarter 4: 1,289 - 1,026 = 263 units

The total cost of overtime production can be calculated as follows: Total cost of overtime production = (Overtime production in Quarter 1 Cost of overtime production) + (Overtime production in Quarter 2 Cost of overtime production) + (Overtime production in Quarter 3 Cost of overtime production) + (Overtime production in Quarter 4 Cost of overtime production)

Substituting the values into the equation: Total cost of overtime production = (108 97) + (362 97) + (112 97) + (263 97)

Performing the calculation: Total cost of overtime production = 10,476 + 35,134 + 10,864 + 25,511 = 82,985 dollars

Therefore, the total cost of overtime production is 82,985 dollars.