A firm manufactures bicycle wheels. Given the following costs and quarterly sales forecasts, use the transportation method to design a…

A firm manufactures bicycle wheels. 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 1: Sales Forecast 50,000

Quarter 2: Sales Forecast 150,000

Quarter 3: Sales Forecast 200,000

Quarter 4, Sales Forecast 52,000

 

Inventory carrying cost: $3 per pair of wheels per quarter

Production per employee: 1,000 pairs of wheels per quarter

Regular workforce: 50 workers

Overtime capacity: 50,000 pairs of wheels

Subcontracting capacity: 40,000 pairs of wheels

Cost of regular production: $50 per pair of wheels

Cost of overtime production: $75 per pair of wheels

 

Cost of subcontracting: $85 per pair of wheels