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Question
NARRBEGIN: SA_104_105A motorcycle company is determining its production schedule for the next four quarters. Demands for motorcycles are forecasted to be 40 in quarter 1; 70 in quarter 2; 50 in quarter 3; 20 in quarter 4. The company incurs four types of costs:
It costs the company $400 to manufacture each motorcycle
A holding cost of $100 per motorcycle left in inventory is incurred at the end of each quarter.
Increasing production from one quarter to the next incurs costs for training employees. It is estimated that a cost of $700 per motorcycle is incurred if production is increased from one quarter to the next.
Decreasing production from one quarter to the next incurs costs for severance pay, decreasing morale, and so forth. It is estimated that a cost of $600 per motorcycle is incurred if production is decreased from one quarter to the next.
All demands must be met on time, and a quarter's production can be used to meet demand for the current quarter (as well as future quarters). During the quarter immediately preceding quarter1, 50 motorcycles were produced. Assume that at the beginning of quarter 1, no motorcycles are in inventory.
NARREND
Determine how to minimize the company's total cost during the next four quarters.
Answer
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