Statistics- Decision Analysis

| December 21, 2015

A company faces the projected demand shown for the next 8 weeks. Unit production costs are shown in the table and very each week. A

storage cost is assessed on ending inventory and varies as shown in the table. At the beginning of week 1, the company has 10 units on

hand. Only 70% of production in any one week can be used during the current week and the remainder will be available in the next week.

The remainder can be used in the following weeks. No backlogging (you can’t have negative ending inventory). Assume you can produce

fractional quantities.
Determine the production required to minimize the cost of meeting demand for the next 8 weeks. Summarize your findings in the blue text

box.
Week 1 2 3 4 5 6 7 8
Demand 20 10 15 17 23 21 14 18
UnitCost $13.00 $14.00 $15.00 $14.50 $13.75 $16.00 $17.00 $16.50
Stg Cost $2.00 $2.00 $2.00 $3.00 $2.00 $2.00 $2.00 $4.00
Beg Inv 10

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