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Assignment 1 (Last date of submission: 25

January, 2014)
Problem 1
Warren Rogers Associates has the following expected production capacity and demand of
Quarter Capacity Demand
1 300 300
!00 "00
3 !#0 300
! ##0 #00
$he company does not accept any %ac&orders and wishes to fulfill demand %y letting
in'entories a%sor% all fluctuations( )ow many computers must they ha'e on hand on
*uarter 1 to meet the forecast demand throughout the year+
Problem 2
$he 'ice,president of the -o.a Company has estimated the following demand
re*uirements for the forthcoming periods:
Quarter /orecast
1 1!00
3 1000
! 1000
# 00
" 00
1 1000
0 1!00
$he operations manager is considering the following plans:
Plan 1: 2aintain a sta%le wor&force that is capa%le of producing 1000 units per *uarter3
and meet the demand %y o'ertime at a premium of 4#0 per unit( 5dle time costs
are e*ui'alent to 4"0 per unit( Do not %uild to in'entory(
Plan 2: 6roduce at a steady rate of 1"00 units per period3 and accept a limited num%er of
%ac&orders( $he stoc&out cost of lost sales is 4100 per unit( 5n'entory costs per
period are 40 per unit(
Plan : 6roduce at a steady rate e*ual to minimum re*uirements3 and su%contract the
additional units at a 41# per unit(
Plan 4: 7ary the wor&force le'el3 which is currently capa%le of producing 1"00 units per
period( $he cost of additional wor&force per 100 units is 4#0003 and the cost of
layoffs per 100 units is 41#00(
Plan 5: 7ary in'entory le'els3 %ut maintain a sta%le wor&force le'el %y maintaining a
constant production rate e*ual to the a'erage re*uirements( $he company can
accumulate re*uired in'entory %efore *uarter 1 at no additional cost( $he
in'entory costs per period are 40 per unit(
!hi"h #lan $ould you re"ommend%