Table 10.1
Bart Incorporated manufactures rotary air fans and uses a production-planning horizon of one-half year. It allows for regular time, part time, overtime, and subcontracting production to meet the demand but no more than 12 units may be made by each of these methods. Both anticipation inventory and backorders are allowed. The beginning (or current) inventory is 20 units. Their first attempt at a sales and operations plan has resulted in the following.

-Use the information in Table 10.1. Which of these changes would result in the greatest improvement (in terms of total cost) for the production plan?
A) Increase anticipation inventory to 30 units at the start of the first month.
B) Reduce anticipation inventory to 18 units at the start of the first month.
C) Increase anticipation inventory to 40 units at the start of the first month.
D) Reduce anticipation inventory to 10 units at the start of the first month.

Question

Table 10.1
Bart Incorporated manufactures rotary air fans and uses a production-planning horizon of one-half year. It allows for regular time, part time, overtime, and subcontracting production to meet the demand but no more than 12 units may be made by each of these methods. Both anticipation inventory and backorders are allowed. The beginning (or current) inventory is 20 units. Their first attempt at a sales and operations plan has resulted in the following.
 
-Use the information in Table 10.1. Which of these changes would result in the greatest improvement (in terms of total cost) for the production plan?
A) Increase anticipation inventory to 30 units at the start of the first month. 
B) Reduce anticipation inventory to 18 units at the start of the first month. 
C) Increase anticipation inventory to 40 units at the start of the first month. 
D) Reduce anticipation inventory to 10 units at the start of the first month.

Quizplus · Accepted Answer

Increasing anticipation inventory allows for better management of demand fluctuations and production costs, potentially leading to significant cost savings. Without specific numbers from Table 10.1, the general principle is that a higher anticipation inventory (option C, increasing to 40 units) can provide more flexibility in managing production schedules and demand, thus potentially offering the greatest improvement in total cost, assuming storage costs and other factors do not outweigh the benefits.

Table 10.1 Bart Incorporated Manufactures Rotary Air Fans and Uses a Production-Planning