Question:-
A furniture company is maintaining a constant work force which can produce 3000 tables, per quarter. The annual demand is 12000 units and is distributed seasonally in accordance with the quarterly indexes Q1 = 0.80, Q2 = 1.40, Q3 = 1.00 and Q4 = 0.80. Inventories are accumulated when demand is less than the capacity and are used up during periods of strong demand to supply the total demand. To take into account any seasonal demand the inventories on hand at the beginning of the first quarter should be at least
Option (A)
0
Option (B)
600
Option(C)
1200
Option(D)
2400
Correct Option:
(B)
Question Solution:
Demand in Ist Quarter = 0.8 x 3000 = 2400
Demand in IInd Quarter = 1.40 x 3000 = 4200
Demand in IIIrd Quarter = 1.00 x 3000 = 3000
Demand in IVth Quarter = 0.8 x 3000 = 2400
\ Demand in the Second Quarter is 4200
Therefore surplus required for consumption = 4200 – 3000 = 1200
Total demand + surplus required in first quarter = 2400 + 1200 = 3600
\ production in every Quarter in 3000, there
Is no problem for 3rd & 4th Quarter
\ Inventory required in at the begning of first Quarter = 3600 – 3000 = 600