Transportation Method
Above the Top, LLC is a sports apparel company. One of their top selling products is a baseball cap for the local university. Last year, the university’s football, basketball, and baseball teams all made it to their respective conference and the football and basketball teams won their division’s title. Above the Top expects demand for the baseball caps to increase in the upcoming year. They create an annual production plan and update it quarterly, but demand varies considerably from quarter to quarter. The forecasted demand and available capacities for the next four quarters are shown in the table below. Quarter Demand 1 2 3 4 300 1300 2400 3300 Regular Capacity 1200 1200 1200 1200 Overtime Capacity 300 300 300 300 Subcontracting Capacity 500 500 500 500 Beginning inventory Inventory holding cost per unit per period Regular production cost per unit Overtime production cost per unit Subcontracting cost per unit 150 $1 $5 $8 $10 a) Use the transportation method to design a minimum cost production plan that will satisfy demand for the upcoming year. (Note: Include the completed transportation method table on the next page as a means of showing your work). (10) b) Use a table following the format below to specify how many units will be produced using the 3 types of capacity for each quarter. (5) Period Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Regular Overtime Subcontracting c) Calculate the total production plan cost for the year. Show your calculations. (5) Transportation Method Table PERIOD OF USE PERIOD OF PRODUCTION Unused 1 2 3 4 Capacity Capacity Beginning Inventory Regular 1 Overtime Subcontract Regular 2 Overtime Subcontract Regular 3 Overtime Subcontract Regular 4 Overtime Subcontract Demand Unmet Demand
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