Response to the following problem:
Federal Electric produces compressors for air conditioning units. Labor and production costs average $60 per unit when they are produced during regular time and $66 per unit when they are produced in overtime. The average carrying (holding) cost for a unit from one quarter to the next is $ 15 per compressor. Thus a unit produced in the first quarter during regular time but not sold until the third quarter would cost the company $60 to produce plus $30 in carrying costs ($15 for each of the two quarters stored). Each quarter, 750 hours of regular time and 500 hours of overtime are available for production. The average time it takes to produce a compressor is 30 minutes.
Given the following quarterly demand projections for compressors, what production plan minimizes total yearly costs for Federal Electric?
|
Quarter
|
Projected Demand
|
|
1
|
1250
|
|
2
|
625
|
|
3
|
3750
|
|
4
|
2500
|