Question

10. The Wetski Water Ski Company is the world’s largest producer of water skis. As you might suspect, water skis exhibit a highly seasonal demand pattern, with peaks during the summer months and valleys during the winter months. Given the following costs and quarterly sales forecasts, use the transportation method to design a production plan that will economically meet demand. What is the cost of the plan? Quarter Sales Forecast 1 50,000 2 150,000 3 200,000 4 52,000 Inventory carrying cost $3.00 per pair of skis per quarter Production per employee 1000 pairs of skis per quarter Regular workforce 50 workers Overtime capacity 50,000 pairs of skis Subcontracting capacity 40,000 pairs of skis Cost of regular production $50 per pair of skis Cost of overtime production $75 per pair of skis Cost of subcontracting $85 per pair of skis

Answer 1

Answer: $ 30,290,000

Explanation:

For this question, the transportation table has been addressed below.

“X” indicates that there will be no possible production in the specific cell.

(i) The total cost of optimum production plan = (50,000 x 50) + (50,000 x 78) + (50,000 x 50) + (50,000 x 75) + (20,000 x 91) + (40,000 x 88) + (50,000 x 50) + (50,000 x 75) + (40,000 x 85) + (50,000 x 50) + (2,000 x 75)

= $ 30,290,000.

Therefore, the cost of the plan will be $30,290,000.