Question 39

You are the operations manager for an OEM manufacturing plantthat produces YBOX game consoles. Based on the sales record from2014, the marketing manager forecasts the demand for Jan-May of2015 in Table 1:

Table 1

Time Period	JAN	FEB	MAR	APR	MAY	Total
Demand Forecast	3,500	4,500	6,000	6,500	5,000
Number of Working Days per Time Pd	20	20	20	20	20

Table 2

Production Time	1 hour per unit
Average labor cost	$12 per hour
Workweek	5 days, 8 hours per day
Days per month	20 work days per month
Beginning inventory	1,000 units
Safety stock	One month
Shortage cost	$10 per unit per month
Carrying cost	$4 per unit per month

Table 3

Time Period	January	February	March	April	May	Total
Beginning Inventory
Working Days per Month
Production Hours Available (Working days permonth x hrs/day x # of workers) 23 workers*
Actual Production(Production hrs available /labor hrs required per unit)
Demand Forecast
Ending Inventory(Beginning inventory + Actualproduction – Demand Forecast)
Units Short(Absolute value of a negative endinginventory)
Shortage Cost(Units short x Cost ofstockout)
Safety Stock (one month)
Units Excess(Ending inventory – Safety Stock)only if positive amount
Inventory Cost(units excess x Inventory holdingcost)
Straight Time Cost(Production hrs available xStraight time labor cost)
* (Sum of Production Requirement hr/unit) / (Sum ofProduction Hours Available x 8 hr /day) = (16,000 x 1) / (100 x 8)= 23

As the operations manager, you prefer to keep a constantworkforce and production level, absorbing variations in demandthrough inventory excesses and shortages. Demand not met is carriedover to the following month. Assuming you currently have 23workers, what is the total cost of this plan (e.g., adding allcosts from January to May)? You can use Table 3 to figure out thecost structure

	A.	$386,200
	B.	$296,400
	C.	$329,800
	D.	$249,200
	E.	$349,200