The expected monthly demand for gardening tools made by a company is: 80, 100, 120, 110, 100 and 90. The company wants to level the production for each month in the planning horizon. The beginning inventory is zero and backorders are allowed. Which months have a backorder and what is the size of those backorders?
Months 4 and 5 have a backorder of 10 each.
To level production, the company must calculate the total demand and divide it by the number of months. The total demand is 600 units (80 + 100 + 120 + 110 + 100 + 90), which equals an average monthly demand of 100 units. By producing 100 units each month, the company will have backorders in months 4 and 5, where demand exceeds production.
This choice incorrectly states the backorder size. The demand for month 4 is 110 and for month 5 is 100, each exceeding the produced 100 units by only 10 units. Thus, the backorder for both months is 10, not 20.
This option is incorrect because the demand for month 2 is 100 and for month 3 is 120. Since the production of 100 units meets the demand for month 2, there is no backorder. Month 3, however, exceeds production by 20, which is not reflected in this choice.
While month 3 indeed has a backorder of 20 units due to demand exceeding production, month 2 does not have a backorder. Therefore, claiming both months have a backorder of 20 is inaccurate; only month 3 qualifies.
This choice accurately represents the backorder situation. In months 4 and 5, the demand exceeds the consistent production of 100 units by 10 units each, confirming that both months have a backorder of 10.
In leveling production for the gardening tools, the company must align output with monthly demand. Given the calculated average production, months 4 and 5 will experience backorders of 10 units each due to higher demand than the fixed output. Understanding these fluctuations is essential for effective inventory management and maintaining customer satisfaction.
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