SOLVED PROBLEMS

1. Javier Cellphone Services assembles customized personal computers from generic parts.
The company purchase generic computer parts in volume at a discount from a variety of
sources whenever they see a good deal.The company has accumulated the demand data in
the table below for its computers for the past five months, from which it wants to consider
exponential smoothing forecasts using smoothing constant equal to 0.30.

Period Month Demand

1 Jan 500

2 Feb 600

3 Mar 550

4 Apr 500

5 May 550

a.530.3

b.525.6

c.532.6

d.526.4

Answer:

b.532.6

Solution:

Period Month Demand Forecast

1 Jan 500 -

2 Feb 600 500

3 Mar 550 530

 4 Apr 500 536

5 May 550 525.2

6 Jun - 532.64

F2  (0.30)(500)  (0.70)(500)
F2  500
F3  (0.30)(600)  (0.70)(500)
F3  530

2. In reference to problem no.1, compute the accuracy of the forecast using MAD

a.80.1

b.75.3

c.70.2

d.74.5

Answer:

c.70.2

Solution:

Period Month Demand Forecast |Dt-Ft|

1 Jan 500 - -

2 Feb 600 500 100

3 Mar 550 530 20

4 Apr 500 536 136

5 May 550 525.2 24.8

280.8
MAD 
4
MAD  70.2
3. In reference to problem no. 1, compute for the mean absolute percent error.

a.12.8%

b.10.5%

c.11.6%

d.10.2%

Answer: a.12.8%

Solution:

Period Month Demand Forecast |Dt-Ft|

1 Jan 500 - -

2 Feb 600 500 100

3 Mar 550 530 20

4 Apr 500 536 136

5 May 550 525.2 24.8

2200 280.8

280.8
MAPE   100%
2200
MAPE  12.76%

4. In reference in problem number 1, what is the approximate forecast for June using a 3 month

moving average?

a.529.25

b.530.45
c.533.33

d.555.81

Answer: c.533.33

Solution:

550  500  550

MA6 
3
MA6  533.33

5. Eddies Bakeshop uses a weighted moving average method to forecast cheesecakes. It assigns

weighs of 6 to previous month’s demand, 4 to demands two months ago and 2 to demand three

months ago. If the sales amounted to 2000 cheesecakes in January. 3500 in February and 3000 in

March, what should be the forecast in April?

a.3600

b.3200

c.3300

d.3250

Answer: a. 3600

Solution:
 (3000 x 6)  (3500 x 4)  (2000 x 2)
WMA4 
10
WMA4  3600

6. Demand for a certain bag is forecast to be 30 units per month, averaged over all 12 months of the
year. The product follows a seasonal pattern, for which the January monthly index is 1.3. What is the
seasonally adjusted sales forecast for January?

a.25

b.30

c.39

d.32

Answer: c.39 units

Solution:

FJan  30 x 1.3
FJan  39 units

7. Use exponential smoothing trend adjustment to forecast deliveries for June. Let alpha =0.4, and
beta= 0.2 and let the initial trend value be 4 and initial forecast be 200.

Month Demand

Jan 200

Feb 212

Mar 214

Apr 222

May 236

Jun 221

a.233.53
b.232.65

c.230.22

d.231.25

Answer: a.233.53

Month Demand Forecast Trend FIT

Jan 200 200 4

Feb 212 202.4 3.68 206.08

Mar 214 208.45 4.15 212.6

Apr 222 213.16 4.27 217.43

May 236 219.26 4.63 223.89

Jun 221 228.73 5.6 234.33

8. A firm has modeled its experience with industrial accidents and found that the number of
accidents per year (Y) is related to the number of employees (X) by the regression equation Y =
4.2 + 0.049*X. R-Square is 0.68. The regression is based on 20 annual observations. The firm
intends to employ 400 workers next year. How many accidents do you project?

a. 27.6

b. 32.2

c. 25.1

d. 23.8

Answer: d.23.8

Solution:
Y  4.2  0.049 x 400
Y  23.8

9. The newly hired purchasing staff of the Sew and Shop Boutique must determine a policy
9. ordering coal to operate 12 sewing machines Each sewing machine requires exactly 5 kgs
for
of coal per day to operate, and the firm operates 300 days per year. The purchasing manager
has determined that the ordering cost is P50 per order, and the cost of holding coal is 20
percent of the average peso value of inventory held. The purchasing staff negotiated a
contract to obtain the coal for P1000 per kg for the coming year. Determine the optimal
quantity of coal to receive in each other.

a.120.67

b.90.88

c.92.05

d.94.86

Answer: d.94.86

Given:

12 sewing machines

5 kgs of coal/day

300 days per year

S=P80/order

H=20% of the average peso value of inventory held

2  (5  12  300)  50
Q
20%  1000
Q  94.86 kgs
10. In reference to problem above, determine the total inventory related cost associated with the
optimal order quantity with cost of coal not included.

a.18523.22

b.18223.87

c.18973.67

d.18853.42

Answer: c.18973.67

Solution:

(50) x (18000) 200 x94.86

TC  
94.86 2
TC  18,973.67

11. In reference to problem no. 9 and if 10 days’ lead-time is required to receive an order of
coal, how much coal should be on hand when an order is placed?

a.420

b.300

c.350

d.400

Answer: a.420

Solution:

R  dL
R  (12 x 5 x 7)
R  420
12. Lead time for Casio’s fastest model is 3 days. Demand during this period averages 250
units per day. What will be the reorder point?

a.250

b.500

c.525

d.750

Answer: d.750 units

Solution:

Re - order point  250 units/ day  3 days

Re - order point  750 units

13. Square Box produces a product for which the annual demand is 10,000 units. Production
averages 100 per day, while demand is 40 per day. Holding costs are 50 php per unit per year;
set-up costs 12000.00. If they wish to produce this product in economic batches, what size
batch should be used?

a.2828

b.2733

c.2351

d.2422

Answer: a. 2828 units

 2  10000  12000
Q
40
50  (1  )
100
Q  2828.43 units

14. In reference to number 13, What is the maximum inventory level?

a.1779.23

b.1697.06

c.1705.45

d.1688.63

Answer: B. 1697.06 units

Solution:

 d
Max Inv Level  Q 1 - 
 p
 40 
Max Inv Level  2828.43 1 - 
 100 
Max Inv Level  1697.06 units

15. In reference to number 13, how many order cycles are there per year?

a.3

b.4

c.5

d.2

Answer: B.4 cycles

Solution:

D
N
Q
10000
N
2828.43
N  3.54  4 cycles

16. Southern Central University uses Php 123,000 of a particular toner cartridge for laser
printers in the student computer labs each year. The director of the university estimates the
ordering cost at Php 45 and thinks that the university can hold this type of inventory at an
annual storage cost of 22% of the purchase price. How many months' supply should the director
order at one time to minimize the total annual cost of purchasing and carrying?

a. Approximately one week

b. Approximately three weeks

c. Approximately five weeks

d. Approximately six weeks

Answer: b. Approximately three weeks

Solution:

2  123,000  45
Q
22%
Q  7093.53
123000
One month' s usage is   Php10250
12
7094
Month' s usage   0.69  3weeks
10250

17. Red Bar that produces wine has been ordering a certain raw material 250 ounces at a time.
The bar estimates that carrying cost is 20% per year, and that ordering cost is about Php 30 per
order. The current price of the ingredient is Php2500 per ounce. The assumptions of the basic
EOQ model are thought to apply. For what value of annual demand is their action optimal?
a.50,800

b.52,083

c.51,998

d.52,800

Answer: b.52,083

Solution:

2  D  30
250 
20% x 2500

250 2  20% x 2500

D
2 x 30
D  52,083.33

18. A photocopy shop estimates that it will require 1,000 reams of a certain type of paper in a
given period. The cost of carrying one unit in inventory for that period is 2 php. The company
buys the paper from a wholesaler in the same place, sending its own truck to pick up the orders
at a fixed cost of 200 php per trip. Treating this cost as the order cost, what is the optimum
number of reams to buy at one time?

a.436.25

b.442.22

c.447.21

d.433.23

Answer: c.447.21
 2  1000  200
Q
2 .0
Q  447.21units

19. In reference to problem number 18, how many times should lots of this size be bought
during this period?

a.2.24

b.1.24

c.3.05

d.3.60

Answer: a.2.24

Solution:

1000
N
447.21
N  2.24

20. In reference to problem number 18, how much is the carrying cost and ordering cost?

a.447.21

b.894.21

c.507.21

d.906.21

Answer: b.894.21

Solution:
  447.21  x 2   1000  x 200
TC     447.21 
 2   
TC  894.42 php

21. Baker Hill can produce their famous hopia at a rate of 1650 boxes of 48 hopia each per day.
The firm distributes the pies to other provinces and restaurants at a steady rate of 250 boxes per
day. The cost of setup, cleanup, idle time in transition from other products to pies, etc., is 32000
php. Annual holding costs are 115 per boxes. Assume 250 days per year.

Determine the optimum production run.

a.6325.22

b.2025.63

c.6402.64

d.3443.66

Answer: c.6402.64

Solution:

2  (250x250)x 32000
Q
 250 
115 x1  
 1650 
Q  6402.64

22. In reference in problem no 21, how many production runs per year?

a.8.56

b.9.04

c.9.76

d.8.98
Answer: c.9.76

The Ligan Carpet Discount Store has annual demand of 10,000 yards of Super Shag carpet. The
annual carrying cost for a yard of this carpet is $0.75 and the ordering cost is $150. The carpet
manufacturer normally charges the store $8 per yard for the carpet. However, the manufacturer
has offered a discount price of $6.50 per yard if the store will order 5,000 yards. How much
should the store order and the total annual inventory cost for that order quantity?

Solution:

62,500
N
6402.64
N  9.76

23. In reference in problem no 21, determine the maximum inventory.

d
Max Inv  Q  1 -  
 p
 250  .54
a.5432 Max Inv  6402.64  1 -  
 1650 
Max Inv  5432.54

b.6054.22

c.4988.25

d.5002.81

Answer: a.5432.54

24. Litely Corp sells 1,350 of its special decorator light switch per year, and places
orders for 300 of these switches at a time. Assuming no safety stocks, Litely estimates a
50% chance of no shortages in each cycle, and the probability of shortages of 5, 10, and
15 units as 0.2, 0.15, and 0.15 respectively. The carrying cost per unit per year is
calculated as $5 and the stockout cost is estimated at $6 ($3 lost profit per switch and
another $3 lost in goodwill, or future sales loss). What level of safety stock should
Litely use for this product? (Consider safety stock of 0, 5, 10, and 15 units)
 a. 0
b. 5
c. 10
d. 15

Answer: c. 10

Solution:

Safety stock  0 units:

Carrying cost equals zero.
Stockout costs = Stockout cost*possible units of shortage*probability of shortage*no
of orders per year
1350 1350 1350
S0  6* 5* 0.2 *  6* 10* 015
. *  6* 15* 015
. *  $128.25
300 300 300
Safety stock  5 units:
Carrying cos t  $5 per unit * 5 units  $25
1350 1350
Stockout cost: S5  6* 5* 015
. *  6* 10* 015
. *  $60.75
300 300
Total cos t  carrying cos t  stockout cos t  $25  $60.75  $85.75
Safety stock  10 units:
Carrying cos t  10 * 5  $50.00
1350
Stockout cost: S10  6* 5* 015
. *  $20.25
300
Total cos t  carrying cos t  plus stockout cos t  $50.00  $20.25  $70.25
Safety stock  15:
Carrying cos t  15* 5  $75.00
Stockout cos ts  0 (there is no shortage if 15 units are maintained)
Total cos t  carrying cos t  stockout cos t  $75.00  $0  $75.00
Therefore: Minimum cost comes from carrying a 10-unit safety stock.

25. A firm has 1,000 “A” items (which it counts every week, i.e., 5 days), 4,000 “B”
items (counted every 40 days), and 8,000 “C” items (counted every 100 days). How
many items should be counted per day?
a. 300
b. 380
c. 320
d. 400
Answer: b.380
 Item Quantity Policy Number of Items to
Class Count Per Day

A 1,000 Every 5 days 1000/5 = 200/day

B 4,000 Every 40 4000/40=100/day

days

C 8,000 Every 100 8000/100=80/day

days

Total items to count: 380/day

26. The Abella Linen Store has annual demand of 10,000 yards of Silk textile. The annual
carrying cost for a yard of textile is 0.75 PHP and the ordering cost is 150 PHP. The textile
manufacturer normally charges the store 8 PHP per yard for the textile. However, the
manufacturer has offered a discount price of 6.50 PHP per yard if the store will order 5,000
yards. How much should the store order and the total annual inventory cost for that order
quantity?

Answer: 5,000 at $67,175

a. 5,000 at 67,175 PHP

b. 5,000 at 65,325 PHP
c. 2,000 at 81,500 PHP
d. 2,000 at 78,420 PHP

Solution:
2 𝑥150𝑥10000
𝑄= √
0.75
𝑄 = 2000 𝑦𝑎𝑟𝑑𝑠

150 𝑥 10,000 0.75 𝑥 2000

𝑇𝐶 = + + 8 𝑥10,000
2,000 2
𝑇𝐶 = 81,500 𝑃𝐻𝑃

At discounted price
𝑄 = 5,000
150 𝑥 10,000 . 75 𝑥 5000
𝑇𝐶 = + + 6.5 𝑥 10,000
5,000 2
𝑇𝐶 = 67,175 𝑃𝐻𝑃

27. Sto.tomas Wine Shop buys a special wine by the barrel from a local distributor. The wine
shop has an annual demand of 800 barrels, which it purchases at a price of 200 php per
 barrel. The annual carrying cost is 25 php, and the cost per order is 150 php. The distributor
has offered the wine shop a reduced price of 180 php per barrel if it will order a minimum of
300 barrels. What is the cost difference if the bar takes the discount?

a. 14299
b. 13254
c. 12224
d. 15458

Answer:

2 𝑥 800 𝑥150
𝑄=√
25
𝑄 = 97.98
150 𝑥 800 25 𝑥 97.98
𝑇𝐶 = + + 200 𝑥 800
97.98 2
𝑇𝐶 = 162,449.49

𝑄 = 300

150 𝑥800 25 𝑥 300

𝑇𝐶 = + + 180 𝑥 800
300 2
𝑇𝐶 = 148,150

𝐶𝑜𝑠𝑡 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 = 162,449.49 − 148,150

𝐶𝑜𝑠𝑡 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 = 14299.49

28. We need 1,000 electric drills per year. The ordering cost for these is $100 per order
and the carrying cost is assumed to be 40% of the per unit cost. In orders of less than
120, drills cost $78; for orders of 120 or more, the cost drops to $50 per unit. Should we
take advantage of the quantity discount?
a. Yes
b. No

Answer: a. Yes

Solution:

(2)(1000)(100)
Q*p ($78)   80 units
(0.4)(78)

(2)(1000)(100)
Q*p ($50)   100 units  120 to take advantage of quantity discount.
(0.4)(50)
Ordering 100 units at $50 per unit is not possible; the discount does not apply until 120
the order equals 120 units. Therefore, we need to compare the total costs for the two
alternatives.
Demand * Order Cost (Quantity of Items) * ( Holding cos t )
Total cos t  Demand * Cost  
Q 2

(1000)(100) (80)(0.4)(78)
Total cos t ($78)  (1000)(78)    $80,498
80 2
(1000)(100) (120)(0.4)(50)
Total cos t ($50)  (1000)(50)    $52,033
120 2

Therefore, we should order 120 each time at a unit cost of $50 and a total cost of
$52,033.

29. Pinky Store carries a modern white kitchen ceiling lamp that is quite popular. The
anticipated demand during lead time can be approximated by a normal curve having a
mean of 180 units and a standard deviation of 40 units. What safety stock should Litely
carry to achieve a 95% service level?

a. 235
b. 224
c. 246
d. 218

Answer: c.246

Solution:

To find the safety stock for a 95% service level it is necessary to calculate the 95th
percentile on the normal curve. Using the standard Normal table from the text, we find
the Z value for 0.95 is 1.65 standard units. The safety stock is then given by

. * 40)  180  66  180  246 Ceiling Lamps

Safety Stock = (165
30. An auto parts supplier sells batteries to car dealers and auto mechanics. The annual
demand is approximately 1,200 batteries. The supplier pays $28 for each battery and
estimates that the annual holding cost is 30 percent of the battery’s value. The supplier
determines that the demand for batteries is normally distributed with mean 4 batteries per
day and standard deviation 3 batteries per day. (The supplier is open 300 days per year.) It
usually takes about 4 days to receive an order from the factory. What is the standard
deviation of usage during the lead time?
a. 6
b. 5
c. 7
d. 3
 Answer: a. 6

Solution:

𝜎𝐿 = 𝜎𝑑√𝐿
𝜎𝐿 = 3 𝑥 √4
𝜎𝐿 = 6

31. In reference to problem no. 30, what is the reorder point needed to achieve a service
level of 95 percent?

a. 25
b. 26
c. 27
d. 28

Answer: b.26

Solution:
𝑅 = 𝑑𝐿 + 𝑧𝜎𝐿 = 4(4) + 1.65(6) = 16 + 9.9 = 25.9 ≅ 26

32. In reference to problem no. 30, What is the safety stock?

a. 9
b. 8
c. 10
d. 11

Answer: c.10

Solution:

The safety stock is the inventory in excess of the expected demand during the lead time.
Safety Stock = 26-16
Safety Stock =10

33. In reference to problem no. 30, what is the holding cost associated with this safety
stock?
a. $84
b. $28
c. $100
d. $35

Answer: a.84

Solution:

Holding Cost = $8.4 x 10

Holding Cost = $84.00

 34. Javier Drugs, Inc., handles a variety of health and beauty aid products. A particular hair
conditioner product costs Javier $2.95 per unit. The annual holding cost rate is 20 percent.
Using an EOQ model, they determined that an order quantity of 300 units should be used.
The lead time to receive an order is one week, and the demand is normally distributed with a
mean of 150 units per week and a standard deviation of 40 units per week. What is the
reorder point if the firm is willing to tolerate a 1-percent chance of a stockout during an
order cycle?
a. 243
b. 205
c. 224
d. 217

Answer: a.243

Solution:

A 1-percent stockout risk corresponds to a service level of 99 percent. Consulting the table, we see
that this service level corresponds to z = 2.3.

dL = 150(1) = 150

σL = σd √ L = 40√ 1 = 40.

R = dL + zσL = 150 + 2.3(40) = 150 + 93.05 = 243.05 → 243 units

35. In reference to problem no. 34, what is the annual safety stock cost associated with
the reorder point?

a. $54.87
b. $45.77
c. $39.50
d. $40.44

Answer: $54.87

Solution:

The safety stock is 93 units, and the holding cost associated with the safety stock is

93×H = 93×ic = 93 × 0.20(2.95) = $54.87

36. Daily demand for a product is normally distributed with a mean of 200 units and a
standard deviation of 20 units. The firm currently uses a reorder point system, with a
lead time of 4 days. What safety stock provides a 50% service level?
a. 30
b. 40
c. 20
d. 60

Answer: B:40

Solution:
Standard deviation during lead time is 20 (4) = 40 units. Z is 0 for 50% :

37. Average daily demand for a product is normally distributed with a mean of 5 units
and a standard deviation of 1 unit. Lead time is fixed at four days. What is the reorder
point if there is no safety stock?
a. 5
b. 4
c. 20
d. 25

Answer: c. 20

Solution:
With no safety stock, the reorder point is D x L = 5 x 4 = 20 units.

38. Average daily demand for a product is normally distributed with a mean of 20
units and a standard deviation of 3 units. Lead time is fixed at 25 days. What reorder
point provides for a service level of 95 percent?

a. 524.75
b. 604.25
c. 557.55
d. 495.05

Answer: a. 524.75

Solution:
𝑹𝑶𝑷 = 𝑫 ⋅ 𝑳 + 𝒛 𝜎√𝐿𝑇
𝑹𝑶𝑷 = 𝟐𝟎 ⋅ 𝟐𝟓 + 𝟏. 𝟔𝟓 ⋅ 𝟑 ⋅ √25 = 𝟓𝟎𝟎 + 𝟐𝟒. 𝟕𝟓 = 𝟓𝟐𝟒. 𝟕𝟓

39. A product has variable demand and constant lead time. Currently this product is
managed by a fixed-period inventory system, for which the review period is one
week. Lead time is four weeks. Annually about 5,200 units of this product are sold.
The current target inventory is 600 units. Today is review day; 75 units are on the
shelves, and orders placed at previous reviews in the amount of 110, 60, and 30 have
not yet been received. There are no backorders. How much is the firm allowing for
safety stock in this case?

a. 400
b. 300
c. 200
d. 500

Answer: c.200

Solution:
Since demand averages 100 units per week, expected demand is 4 x 100 = 400 units. The
target value of 600 implies that safety stock is 200 units.

40. In reference to problem No. 39, what should be the order amount this week

a. 225
b. 230
 c. 125
d. 250

Answer: a.225

Solution:
Q = Target – On-hand – Pending + Backorders = 500 - 75 – (110 + 60 + 30) + 0 = 225

41. Sanchez Builders has the following aggregate demand requirements and other
data for the upcoming four quarters. What is the cost of the plan if the demand is
chased by hiring and firing?

Quarter Demand
1 1300
2 1400
3 1500
4 1300

Last quarter's output 1500 units

Beg. Inventory 200 units
Stockout Cost 50 php per unit
Inventory Holding Cost 10 php per unit
Hiring workers 4 php per unit
Firing Workers 8 php per unit
Unit Cost 30 php per unit
Overtime 10 php extra per unit

a. 165,400 php
b. 167,400 php
c. 162,400 php
d. 163,400 php

Answer: a.165,400 php

Solution:
Regular Regular
Sanchez Units Units
Demand Time Time
Builders Increase Decrease
Capacity Production
Beg Inventory
Quarter 1 1300 1100 1100 0 400
Quarter 2 1400 1400 1400 300 0
Quarter 3 1500 1500 1500 100 0
Quarter 4 1300 1300 1300 0 200
Total (unis) 5500 5300 5300 400 600
@30 /unit @4 /unit @8 /unit
Subtotal Cost 159,000 1,600 4,800
Total Cost 165,400

42. In reference to problem no.41, what is the cost of the plan if the strategy is to
produce at a constant rate of 1200 and obtain the remainder from overtime?
 a. 165,400 php
b. 167,400 php
c. 162,400 php
d. 163,400 php

Answer: b.167,400 php

Solution:
Regular Regular
Sanchez Ovetime Overime Units
Demand Time Time Inventory
Builders Capacity Production Decrease
Capacity Production
Beg
Inventory 200
Quarter 1 1300 1200 400 1200 0 100 300
Quarter 2 1400 1200 400 1200 100 0 0
Quarter 3 1500 1200 400 1200 300 0 0
Quarter 4 1300 1200 400 1200 100 0 0
Total (unis) 5500 4800 1600 4800 500 100 300
@10 @8
@30 /unit @40 /unit /unit /unit
Subtotal Cost 144,000 20,000 1,000 2,400
Total Cost 167,400

43. New Open Laundry Inc., makes commercial and industrial laundry machines (the
kinds hotels use), and has these aggregate demand requirements for the next six
months. The firm has regular capacity for 200 units, and overtime capacity for 40
more. Currently, subcontracting can supply up to 100 units per month, but the
subcontracting firm may soon be unavailable. What is the cost of the plan if the
strategy is to produce on leveled, incurred back orders and accept inventory charges

Month Demand
Jan 220
Feb 160
Mar 200
Apr 210
May 200
Jun 190

Cost Information
Previous output 150 units
Beg Inventory 100 units
Stockout Cost 250 php / unit
Inventory holding
cost 100 php/ unit at the end of the month
Unit cost, regular
time 1,200 php per unit
Subcontracting 2,000 php per unit
Unit cost, overtime 1,500 php per unit
Hiring workers 200 php per unit
Firing workers 500 php per unit
 a. 1,499,000
b. 1,333,000
c. 1,326,000
d. 1,205,000

Answer: c. 1,326,000

Solution:

New Open Regular Time Regular Time Inventory Units

Demand
Laundry Inc. Capacity Production (End PD) Increase
Beg. Inventory 100
Jan 220 180 180 60 30
Feb 160 180 180 80 0
Mar 200 180 180 60 0
Apr 210 180 180 30 0
May 200 180 180 10 0
Jun 190 180 180 0 0
Total (units) 1180 1080 1080 240 30
@1200/unit @100/unit @200/unit
Subtotal Cost 1,296,000 24,000 6,000
Total Cost 1,326,000

44. In reference to problem 43, what is the cost of the plan if the strategy is to produce
with a base quantity of 120, using first, overtime, then subcontracting, to meet the
demand.

a. 1,499,000
b. 1,333,000
c. 1,326,000
d. 1,205,000

Answer: a. 1,499,000
Regular Regular
New Open Overtime Subcontract Overtime Units
Demand Time Time Subcon
Laundry Inc Capacity Capacity Production Decrease
Capacity Production
Beg
Inventory
Jan 220 120 40 100 120 0 0 30
Feb 160 120 40 100 120 40 0 0
Mar 200 120 40 100 120 40 40 0
Apr 210 120 40 100 120 40 50 0
May 200 120 40 100 120 40 40 0
Jun 190 120 40 100 120 40 30 0
Total (units) 1180 720 240 600 720 200 160 30
@1200/
@1500/unit @2000/unit @500
unit
Subtotal
Costs 864,000 300,000 320,000 15,000
Total Cost 1,499,000

45.