Answer:
a) it will first use overtime production and then, subcontract competitor
b) It will produce 650 units during overtime
c) it will purchase 100 units via subcontracting
d) considering the outsource production, the company could be able to produce and sale 1,100 extra units As the subcontractor can produce up to 300 sets per uarter giving a capacity of 1,200 per year and we only use 100 sets.
Explanation:
The company will operate at full capacity thus, producing 450 per uqarter now we need to check if it is better to do overtime or to outsource:
$50 cost of set produced in overtime.
storage cost $7
Total: $57 dollars
outsource $85
<em>It is better to produce and store rather than outsource.</em>
Q1 600- 450 = 150 units
The company will produce his <em>overtime of 300 units</em>
150 - 300 =<em> 150 set are stored to next quarter.</em>
Q2 700 - 450 = 350 units
350 units - 150 stored - <em>150 overtime</em> = <em>50 outsource</em>
Q3 600 - 450 = 150 units
there is no store and no overtime available thus, all are <em>outstource</em>
Q4 700 - 450 = 250 units
250 - <em>200 overtime</em> = <em>50 outsource</em>
