The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
$$\begin{array} { | c | c | }
\hline \text { Month } & \text { Demand Forecast } \
\hline \text { January } & 1,200 \
\hline \text { February } & 2,400 \
\hline \text { March } & 3,600 \
\hline \text { April } & 4,800 \
\hline \text { May } & 2,200 \
\hline \text { June } & 200 \
\hline
\end{array}$$ The costs for the managerial levers appear in this table.
$\begin{array}{|l|c|}
\hline \text { Item } & \text { Cost } \
\hline\text { Materials cost/unit } & \$ 10 \
\hline \text { Inventory holding cost/unit/month } & \$ 2 \
\hline \text { Marginal cost of stockout/unit/month } & \$ 5 \
\hline \text { Hiring and training cost/worker } & \$ 300 \
\hline \text { Layoff cost/worker } & \$ 500 \
\hline \text { Labor hours required/unit } & 4 \
\hline \text { Regular time cost/hour } & \$ 4 \
\hline \text { Over time cost/hour } & \$ 6 \
\hline \text { Beginning inventory equals } & 1000 \
\hline \text { Ending inventory greater than } & 500 \
\hline \text { Marginal subcontracting cost/unit } & \$ 30\
\hline
\end{array}$ The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
-Use the Okra Colada scenario to answer this question.Which of the following statements is true when using linear programming to solve this sales and operations planning problem?

Question

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
 $$\begin{array} { | c | c | } 
\hline \text { Month } & \text { Demand Forecast } \
\hline \text { January } & 1,200 \
\hline \text { February } & 2,400 \
\hline \text { March } & 3,600 \
\hline \text { April } & 4,800 \
\hline \text { May } & 2,200 \
\hline \text { June } & 200 \
\hline
\end{array}$$ The costs for the managerial levers appear in this table.
 $\begin{array}{|l|c|}
\hline \text { Item } & \text { Cost } \
\hline\text { Materials cost/unit } & \$ 10 \
\hline \text { Inventory holding cost/unit/month } & \$ 2 \
\hline \text { Marginal cost of stockout/unit/month } & \$ 5 \
\hline \text { Hiring and training cost/worker } & \$ 300 \
\hline \text { Layoff cost/worker } & \$ 500 \
\hline \text { Labor hours required/unit } & 4 \
\hline \text { Regular time cost/hour } & \$ 4 \
\hline \text { Over time cost/hour } & \$ 6 \
\hline \text { Beginning inventory equals } & 1000 \
\hline \text { Ending inventory greater than } & 500 \
\hline \text { Marginal subcontracting cost/unit } & \$ 30\
\hline
\end{array}$ The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
-Use the Okra Colada scenario to answer this question.Which of the following statements is true when using linear programming to solve this sales and operations planning problem?

Quizplus · Accepted Answer

Linear programming is used to optimize the plan for meeting the demand forecast and minimize the total cost. The model will determine the optimal decision variables, such as the number of units produced, the amount of inventory held, the number of workers hired or laid off, and whether to use overtime or subcontracting. Based on the given cost information, it is likely that the model will choose to build more units using subcontracting than using overtime because the marginal cost of subcontracting is lower than that of overtime. The number of stockouts is likely to be minimized to reduce the cost of lost sales. Therefore, statement B is true. Statements A, C, and D are not necessarily true based on the given information.

The Okra Colada an Okra Farm Anticipates Highly Seasonal Demand

The Okra Colada
an Okra Farm Anticipates Highly Seasonal Demand