Supply Chain Calculations. Scenario: Carrier sells air conditioning units to distributors. Ahead of the upcoming summer, demand probability is 40,000 units (25%), 55,000 units (35%), 70,000 units (25%), and 80,000 units (15%).
· Fixed cost of production = $500,000
· Variable cost of production per unit = $1,200
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· Salvage value for unsold products = $900
Answer the following questions:
- If the manufacturer is considering production quantities of 40,000 units or 80,000 units, assuming 90% of product will be sold and 10% will be salvaged, what is the profit per unit? Which option would you select and why?
- The manufacturer is considering production quantities of 40,000 units or 80,000 units. For the 40,000 unit plan, assume 95% of product will be sold and 5% will be salvaged; for the 80,000 unit plan, assume 80% of product will be sold and 20% will be salvaged. What is the profit per unit? Which option would you select and why?
- With an expected demand of 55,000 units for the summer (May–July), a maximum demand of 80,000 units for the summer, and a 2-week lead time, calculate the amount of safety stock needed to cover demand.
- If the manufacturer chooses to produce 70,000 units but there is demand for 80,000 units, how much total profit and per-unit profit would be lost?
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