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A major manufacturer of mobile phones uses inventory, overtime, and subcontracting to accommodate periodic demand fluctuations. The company creates a production plan annually but updates it quarterly. Table 7 below provides the expected demand and available capacities for the companys next four quarters (values are in units). Use the transportation method to design a minimum cost production plan that will satisfy demand for the upcoming year. They have 150 units in inventory at the beginning of the planning period and backordering is not permitted.

1. FillinTable8belowspecifyinghowmanyunitswillbeproducedeachperiodusingthe3typesofcapacity (i.e., regular, overtime, and subcontracting). (15)

2. Include the total cost for the production plan for the year in the last row of Table 8. (5)

Note: Include at a minimum a copy of the completed transportation method table and your total cost calculation in your test document as a means of showing your work (see template provided - Table 9).

Regular production cost per unit: 78 Overtime production cost per unit: Subcontracting cost per unit: 104

Subcontracting cost per unit: 117 Inventory holding cost per unit per quarter: Beginning Inventory:1

Table 8: Production plan

Quarter Demand 1 2 690 920 1840 Regular Overtime Subcontracting Capacity Capacity Capacity 1050 92 400 1050 92 400 1050 115 400 1050 115 400 3 4 2185 Production Period Units Produced Overtime Subcontracting Regular Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Units Total Cost Table 9: Transportation Method Template Quarter 1 DEMAND FOR Unused Total Quarter Quarter Quarter Capacity Capacity 2 3 4 Available Supply From Beginning Inventory Quarter 1 Regular Overtime Subcontracting Quarter 2 Regular Overtime Subcontracting Quarter 3 Regular Overtime Subcontracting Quarter 4 Regular Overtime Subcontracting Total Demand Unmet Demand

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