Question

Using the cut-and-try method for aggregate operations planning we can determine the production requirement in units of product. If the beginning inventory is 100 units, the demand forecast is 1,200, and the necessary safety stock is 20% of the demand forecast, which of the following is the production requirement? A) 1,200
B) 1,300
C) 1,340
D) 1,500
E) 1,540

Answer 1

Answer:

units to be produced                   1,340

Explanation:

demand forecast                         1,200

safety stock 20% of demand

20% of 1,200                                  240

Total production demand           1,440

beginning inventory                     (100)

units to be produced                   1,340

the demand forecast will be the sales for the period, we are adding a 20% safety in cash of higher demand

so the total production needs are 1,440

(forecasted demand + safety stock)

Next we subtract the beginning inventory, as those units are already produced, we need to produce less to obtain the goal of 1,440 units available during the period.