chapman pharmaceuticals, a large manufacturer of drugs, has this aggregate demand forecast (in thousands of…

chapman pharmaceuticals, a large manufacturer of drugs, has this aggregate demand forecast (in thousands of liters) for a liquid cold medicine:\nmonth demand\njanuary 180\nfebruary 110\nmarch 65\napril 25\nmay 5\njune 14\njuly 12\naugust 13\nseptember 29\noctober 60\nnovember 125\ndecember 130\nthe firm has a normal production rate of 90 thousand liters per month, and the initial inventory is 110 thousand liters. inventory - holding costs are $28 per 1,000 liters per month, regular - time production costs are $260 per 1,000 liters. overtime costs an additional 20 percent, and undertime costs an additional 14 percent. assume that there are no lost sales or rate change costs. use the agg plan - level and agg plan - chase excel templates to compute the costs of a level production rate of 90 thousand liters per month and a chase demand production plan. round all cost values to the nearest cent and all other answers to the nearest whole number. do not round intermediate calculations. if your answer is zero, enter \0\.\nlevel production plan:\nmonth demand (1,000s) cumulative demand (1,000s) production (1,000s) cumulative product availability (1,000s) ending inventory (1,000s) lost sales (1,000s)\njanuary 180 180 90 20 0\nfebruary 110 290 90 0 0\nmarch 65 355 90 25 0\napril 25 380 90 90 0\nmay 5 385 90 175 0\njune 14 399 90 251 0\njuly 12 411 90 329 0\naugust 13 424 90 406 0\nseptember 29 453 90 467 0\noctober 60 513 90 497 0\nnovember 125 638 90 462 0\ndecember 130 768 90 422 0\naverage 88032 0

chapman pharmaceuticals, a large manufacturer of drugs, has this aggregate demand forecast (in thousands of liters) for a liquid cold medicine:\nmonth demand\njanuary 180\nfebruary 110\nmarch 65\napril 25\nmay 5\njune 14\njuly 12\naugust 13\nseptember 29\noctober 60\nnovember 125\ndecember 130\nthe firm has a normal production rate of 90 thousand liters per month, and the initial inventory is 110 thousand liters. inventory - holding costs are $28 per 1,000 liters per month, regular - time production costs are $260 per 1,000 liters. overtime costs an additional 20 percent, and undertime costs an additional 14 percent. assume that there are no lost sales or rate change costs. use the agg plan - level and agg plan - chase excel templates to compute the costs of a level production rate of 90 thousand liters per month and a chase demand production plan. round all cost values to the nearest cent and all other answers to the nearest whole number. do not round intermediate calculations. if your answer is zero, enter \0\.\nlevel production plan:\nmonth demand (1,000s) cumulative demand (1,000s) production (1,000s) cumulative product availability (1,000s) ending inventory (1,000s) lost sales (1,000s)\njanuary 180 180 90 20 0\nfebruary 110 290 90 0 0\nmarch 65 355 90 25 0\napril 25 380 90 90 0\nmay 5 385 90 175 0\njune 14 399 90 251 0\njuly 12 411 90 329 0\naugust 13 424 90 406 0\nseptember 29 453 90 467 0\noctober 60 513 90 497 0\nnovember 125 638 90 462 0\ndecember 130 768 90 422 0\naverage 88032 0

Answer

Explanation:

Step1: Calculate production cost

The firm has a regular - time production rate of 90 thousand liters per month for 12 months. Regular - time production cost is $260 per 1,000 liters. Production cost = $90\times12\times260=$280800$

Step2: Calculate inventory - holding cost

We calculate the ending inventory for each month as follows: January: Initial inventory is 110 thousand liters, production is 90 thousand liters, and demand is 180 thousand liters. Ending inventory = $110 + 90-180=20$ thousand liters. For February: Ending inventory = $20+90 - 110 = 0$ thousand liters. For March: Ending inventory = $0+90 - 65 = 25$ thousand liters. For April: Ending inventory = $25+90 - 25 = 90$ thousand liters. For May: Ending inventory = $90+90 - 5 = 175$ thousand liters. For June: Ending inventory = $175+90 - 14 = 251$ thousand liters. For July: Ending inventory = $251+90 - 12 = 329$ thousand liters. For August: Ending inventory = $329+90 - 13 = 406$ thousand liters. For September: Ending inventory = $406+90 - 29 = 467$ thousand liters. For October: Ending inventory = $467+90 - 60 = 497$ thousand liters. For November: Ending inventory = $497+90 - 125 = 462$ thousand liters. For December: Ending inventory = $462+90 - 130 = 422$ thousand liters. Inventory - holding cost = $\sum_{i = 1}^{12} \text{Ending inventory}_i\times28$ $=(20 + 0+25+90+175+251+329+406+467+497+462+422)\times28$ $=3144\times28=$88032$

Step3: Calculate total cost

Total cost = Production cost+Inventory - holding cost Total cost = $280800+88032=$368832$

Answer:

The total cost for the level - production plan is $$368832$.