Develop a level strategy and calculate the corresponding, Operation Management

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Develop a level strategy and calculate the corresponding

Develop a level strategy and calculate the corresponding cost, given the following forecast:

Month 1 2 3 4 5 6

Forecast 380 400 420 440 460 480

Regular capacity is 400 units per month. Overtime capacity is 40 units per month. There is no constraint on the capacity of subcontracting. Assume that no backorder is allowed. The beginning inventory is 0. The ending inventory and backorder must be zero. Hint: compare all possible production plans and select the best with the lowest total cost.

Unit costs are: Regular output = $25/unit, Overtime = $40/unit, Subcontract = $60/unit, Inventory cost = $15/unit/period/average inventory.

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