Calpal is a small manufacturer of a special engineering workstation. The company operates one plant with a monthly capacity of 3,000 units. In addition, 750 units can be produced on an overtime basis, which is 30% more expensive, on the average. The labor cost when producing a regular time is $1,000; it is $1,300 on overtime (per workstation produced). The company may use inventories to reduce fluctuations in production, but carrying inventories costs money. The cost of carrying one finished unit in inventory is $80 per unit per month. a.All demand must be met according to the following schedule: Month 1 2 3 4 5 6 Units 2,500 3,200 3,800 3,500 5,000 3,000 b. There should be no inventory left at the end of the sixth month. c. There is no inventory at the present time. The problem is to find the production schedule for the next six months that minimizes total cost.
plant capacity 2500
over time extra cost 0.26
regular cost 1130
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