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Capacities of production of an item over 3 consecutive months in regular time are 100,100 and 80 and in overtime are 20, 20 and 40. The demands over those 3 months are 90, 130 and 110. The cost of production in regular time and overtime are respectively Rs. 20 per item and Rs. 24 per item. Inventory carrying cost is Rs. 2 per item month. The levels of starting and final inventory are nil. Backorder is not permitted. For minimum cost of plan, the level of planned production in overtime in the third month is
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- 40
- 30
- 20
- 0
Correct Option: B
For minimum total cost the entire regular time production capacity has to be used.
Hence, total over time capacity required
= (90 + 130 + 110) – (100+ 100 + 80) = 50 20
Overtime units will be used up in first 2 weeks
∴ Hence 30 overtime units are needed to fulfil the 3rd month demand.