Manager Chris Channing of Fabric Mills, Inc., has developed the forecast shown in the table for bolts of cloth. The figures are in hundreds of bolts. The department has a normal capacity of 275(00) bolts per month, except for the seventh month, when capacity will be 250(00) bolts. Normal output has a cost of $40 per hundred bolts. Workers can be assigned to other jobs if production is less than normal. The beginning inventory is zero bolts.
Month 1 2 3 4 5 6 7 Total
Forecast 250 300 250 300 280 275 270 1,925
a. Develop a chase plan that matches the forecast and compute the total cost of your plan. Overtime is $60 per hundred bolts. (Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0″ wherever required. Omit the “$” sign in your response.)
b. Would the total cost be less with regular production with no overtime, but using a subcontractor to handle the excess above normal capacity at a cost of $50 per hundred bolts? Backlogs are not allowed. The inventory carrying cost is $2 per hundred bolts. (Round your Average values to 1 decimal place. Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0″ wherever required. Omit the “$” sign in your response.)