Question

Question 7 options:

The J. Mehta Company’s production manager is planning a series of one-month production periods for stainless steel sinks. The forecasted demand for the next four months is as follows:

Month	Demand for Stainless Steel Sinks
1	120
2	160
3	260
4	180

The Mehta firm can normally produce 100 stainless steel sinks in a month. This is done during regular production hours at a cost of $95 per sink. If demand in any one month cannot be satisfied by regular production, the production manager has three other choices:

(1) he can produce up to 35 more sinks per month in overtime but at a cost of $125 per sink;

(2) he can purchase a limited number of sinks from a friendly competitor for resale (the maximum number of outside purchases over the four-month period is 450 sinks, at a cost of $150 each);

(3) Or, he can fill the demand from his on-hand inventory (i.e. beginning inventory). The inventory carrying cost is $10 per sink per month (i.e. the cost of holding a sink in inventory at the end of the month is $10 per sink). There are 10 Sinks in Inventory at the beginning of Month 1.

Setup the Production Smoothing problem with the goal of minimizing cost.

Regular Production Month 1 =

Regular Production Month 2 = 100
Regular Production Month 3 = 100
Regular Production Month 4 = 100


Overtime Production Month 1 =

Overtime Production Month 2 =

Overtime Production Month 3 =

Overtime Production Month 4 =

Purchases Month 1 = 0
Purchases Month 2 = 0
Purchases Month 3 =

Purchases Month 4 =

Ending Inventory Month 1 =

Ending Inventory Month 2 =

Ending Inventory Month 3 = 0
Ending Inventory Month 4 = 0


Minimum Cost =

Answer 1

I have calculated Holding cost basis the ending inventory of each month.

Below is the screenshot of the production schedule table -

Below is the screenshot of the formula applied -

Below is the screenshot of the solver -

Below is the screenshot of the result -