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Production Cost Analysis for Demand Forecasts

The document outlines a series of assignments related to production planning for various manufacturing companies, including ABC Manufacturing, XYZ Furniture, PQR Electronics, LMN Beverages, and OPQ Appliances. Each assignment provides demand forecasts, production strategies, costs associated with holding, overtime, and subcontracting, and requires the calculation of total costs based on these factors. The tasks involve developing cost-minimizing production plans and analyzing trade-offs between overtime and subcontracting.

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3 views3 pages

Production Cost Analysis for Demand Forecasts

The document outlines a series of assignments related to production planning for various manufacturing companies, including ABC Manufacturing, XYZ Furniture, PQR Electronics, LMN Beverages, and OPQ Appliances. Each assignment provides demand forecasts, production strategies, costs associated with holding, overtime, and subcontracting, and requires the calculation of total costs based on these factors. The tasks involve developing cost-minimizing production plans and analyzing trade-offs between overtime and subcontracting.

Uploaded by

kasthamandap2021
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Assignment:

Qs no.1

ABC Manufacturing produces electric fans. The demand forecast for the
next four months is as follows:

Month Forecasted Demand (Units)


January 1,000
February 1,200
March 1,600
April 1,200

The company uses a mixed strategy, maintaining a constant workforce to


produce 1,100 units per month, and meeting the rest of the demand through
overtime or subcontracting.

Additional information:

 Holding cost per unit per month: Rs.20


 Overtime/Subcontracting cost per unit: Rs.100
 No backorders are allowed.

Qs no.2

XYZ Furniture produces tables. The demand forecast for the next three
months is:

Month Forecasted Demand (Units)


May 800
June 1,100
July 1,300

Production strategy:

 Regular production: 900 units/month


 Maximum overtime allowed: 200 units/month
 Holding cost: Rs.15/unit/month
 Overtime cost: Rs.120/unit
 Shortage not allowed
Use suitable strategy to determine the total cost including overtime cost and
holding cost.

Qs no.3

PQR Electronics assembles mobile phones.

Month Demand (Units)


August 2,000
September 2,500
October 1,800

Details:

 Regular production: 2,000 units/month


 Subcontracting cost: Rs.90/unit
 Inventory cost: Rs.25/unit/month
 Beginning inventory: 0

Find out the total cost through mixed production system.

Qs no.4

LMN Beverages forecasts the following monthly demand for juice packs:

Month Demand (Units)


Nov 1,500
Dec 1,700
Jan 2,200

Production strategy:

 Regular production: 1,600 units/month


 Overtime production up to: 500 units/month
 Beginning inventory: 300 units
 Holding cost: Rs.10/unit/month
 Overtime cost: Rs.80/unit

Qs no. 5 Subcontracting vs. Overtime Trade-off

OPQ Appliances produces heaters.


Month Demand (Units)
March 1,000
April 1,300
May 1,600

Strategy:

 Regular capacity: 1,200 units/month


 Extra demand can be met via:
o Overtime at Rs.90/unit (max 200 units)
o Subcontracting at Rs.70/unit (unlimited)
 Holding cost: Rs.25/unit/month
 Initial inventory: 150 units

Tasks:

1. Develop a cost-minimizing production plan.


2. Calculate inventory, overtime, and subcontracting costs.

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