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1.4 On the average, a company has a work-in-process lead time of 10 weeks and annual cost of
goods sold of $30 million. Assuming that the company works 50 weeks a year:
A. What is the dollar value of the work-in-process?
B. If the work-in-process could be reduced to 5 weeks and the annual cost of carrying inventory was
20% of the WIP inventory value, what would be the annual savings?
1.5 Amalgamated Fenderdenter’s sales are $10 million. The company spends $3.5 million for
purchase of direct materials and $2.5 million for direct labor; overhead is $3.5 million and profit is
$500,000. Direct labor and direct material vary directly with sales, but overhead does not. The
company wants to double its profit.
A. By how much should the firm increase annual sales?
B. By how much should the firm decrease material costs?
C. By how much should the firm decrease labor cost?
2.6. A production line is to run at 1000 units per month. Sales are forecast as shown in the following.
Calculate the expected period-end inventory. The opening inventory is 600 units. All periods have
the same number of working days.
Period
forecast
Planned
production
Planned
inventory
1
750
1000
2
800
1000
3
1050
1000
4
1600
1000
5
1000
1000
6
850
1000
600
2.8. A company wants to develop a level production plan for a family of products. The opening inventory
is 550 units, and a decrease to 200 units is expected by the end of the plan. The demand for each of the
periods is given in what follows. All periods have the same number of working days. How much should
the company produce each period? What will be the ending inventories in each period? Do you see any
problems with the plan?
Period
1
Forecast
1300
demand
Planned
production
2
1200
3
800
4
600
5
800
6
900
Total
Planned
550
inventory
2.16. The opening backlog is 1100 units. Forecast demand is as shown here. Calculate the weekly
production for level production if the backlog is to be increased to 1200 units.
Week
1
Forecast
1200
demand
Planned
production
Projected
backlog
2
1100
3
1200
4
1200
5
1100
6
1000
total
1100
2.18. For the following data, calculate the number of workers required for level production and the
resulting month-end inventories. Each worker can produce 9 units per day, and the desired ending
inventory is 800 units. Why is it not possible to reach the exact ending inventory target?
Month
1
Working
20
days
Forecast
2800
demand
Planned
production
Planned
inventory
1000
2
24
3
12
4
22
5
20
6
19
3000
2700
3300
2900
3200
Total
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