850 cost 0 0 10000 28000 340000 ot sc inv 20 0 0

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Unformatted text preview: (SC) $200 per unit Unit Cost $100 per unit Overtime (OT) $50 extra per unit What is the best production plan? Plan A – Chase Strategy (H and F); Plan B – Level Strategy, or Plan C – 700 level and the remaining as Subcontracting Plan A : Chase Strategy RT OT SC Inv. BL H F Ini. Inv. = 0 Previous Qty = 800 units Cost per unit 100 Period Dem. RT 1 700 900 3 200 10 700 2 150 100 40 Inv. cost BL Difference H F 0 0 0 -100 0 100 900 0 0 0 200 200 0 1200 1200 0 0 0 300 300 0 4 600 600 0 0 0 -600 0 600 Total 3400 3400 0 0 500 700 Avg. 850 Cost --- $0 $0 $10,000 $28,000 $340,000 OT SC Inv. 20 0 0 TC = $378,000 Plan B : Level Strategy RT OT SC Inv. BL H F Cost per unit 100 Period Dem. RT 1 700 2 150 200 20 40 Inv. cost BL Difference H F 850 150 1500 0 50 50 0 900 850 100 1000 0 0 0 0 3 1200 850 -250 0 25000 0 0 0 4 600 850 0 0 0 0 0 0 Total 3400 3400 2500 25000 50 0 Avg. 850 Cost --- $2500 $25,000 $1000 $0 0 SC 100 Inv. $340,000 OT 10 Ini. Inv. = 0 Previous Qty = 800 units 0 Inv. /BL period 1 = 850 – 700 = 150 period 2 = 150 + 850 – 900 = 100 period 3 = 100 + 850 – 1200 = ­250 period 4 = ­250 + 850 – 600 = 0 Difference : H and F = RT production – Inv. Fin. = 850 – 800 = 50 C.T = $368,500 Plan C : Production 700 units with SC RT OT SC Inv. BL H F Ini. Inv. = 0 Previous Qty = 800 units Cost per unit 100 Period 150 200 10 100 20 40 Dem. RT SC Inv. Inv. cos BL Difference H F 1 700 700 --- 0 0 0 -100 0 100 2 900 700 200 0 0 0 0 0 0 3 1200 700 500 0 0 0 0 0 0 4 600 700 0 100 1000 0 0 0 0 Total 3400 2800 700 $1000 0 0 100 Avg. 850 Cost --- $280,000 $140,000 $1000 $0 $0 $4,000 TC = $425,000 Plan A Plan Plan B Plan C $378,000 $368,500 $425,000 Plan B has the lowest cost. It is the best plan to choose...
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This document was uploaded on 02/10/2014.

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