The Holloway Calendar Company produces a variety of printed calendars for both commercial and private use. The demand for calendars is highly seasonal, peaking in the third quarter. Current inventory is 165,000 calendars, and ending inventory should be 200,000 calendars.
Ann Ritter, Holloway’s manufacturing manager, wants to determine the best production plan for the demand requirements and capacity plan shown in the following table. (Here, demand and capacities are expressed as thousands of calendars rather than as employee-period equivalents.) Ritter knows that the regular-time cost is $0.50 per unit, overtime cost is $0.75 per unit, subcontracting cost is $0.90 per unit, and inventory holding cost is $0.10 per calendar per quarter. Unused regular-time capacity is not paid.
a. Recommend a production plan to Ritter, using the Transportation Method (Production Planning) module of POM for Windows. (Do not allow any stockouts or backorders to occur.)
b. Interpret and explain your recommendation.
c. Calculate the total cost of your recommended production plan.
