Compare the costs to a level plan that uses inventory, Operation Management

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Compare the costs to a level plan that uses inventory

Problem

Compare the costs to a level plan that uses inventory to absorb fluctuations. Inventory carrying cost is $4 per engine per month. Backlog cost is $135 per engine per month. There should not be a backlog in the last month. Set regular production equal to the monthly average of total forecasted demand. Assume that using overtime is not an option.

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Operation Management: Compare the costs to a level plan that uses inventory

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Operation Management: Compare the costs to a level plan that uses inventory

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