Currently the firm is using a pure level strategy.It has 60 workers who produce 1200 units per quarter each.The cost per unit is $35.00.The cost of holding 1 unit per quarter is $1.50.Of the following descriptions of the situation, what is true? The quarterly demand information is provided below.
Q1:120,000 units, Q2:100,000 units, Q3:80,000 units, Q4:92,000 units
A) Throughout the year, no back orders occur
B) During the first quarter, 22,000 units were back ordered
C) A backorder occurred only during 1 quarter
D) A backorder occurred only during 3 quarter

Question

Quizplus · Accepted Answer

Since the firm is using a pure level strategy, it produces the same amount of units every quarter. Therefore, during the first quarter, the firm produced 60 x 1200 = 72,000 units. However, the demand for that quarter was 120,000 units, leaving a shortage of 48,000 units. This means that 22,000 units were back ordered. Throughout the year, there may or may not have been any back orders, but since option B states that there was a back order during the first quarter, that statement is true. Options C and D state that there was a back order during only 1 or 3 quarter, respectively, but this is not necessarily true based on the information provided. Therefore, the best choice is B.

Currently the Firm Is Using a Pure Level Strategy