Mondo Motorcycles is determining its production schedule for the next four quarters. Demands for motorcycles are forecasted to be 400 in quarter 1; 700 in quarter 2; 500 in quarter 3; 200 in quarter 4. Mondo incurs four types of costs, as described here:
¦ It costs Mondo $800 to manufacture each motorcycle.
¦ At the end of each quarter, a holding cost of $100 per motorcycle left in inventory is incurred.
¦ When production is increased from one quarter to the next, a cost is incurred, primarily for training employees. If the increase in production is x motorcycles, the cost is $700x.
¦ When production is decreased from one quarter to the next, a cost is incurred, primarily for severance pay and decreased morale. If the decrease in production is x motorcycles, the cost is $600x.
All demands must be met on time, and a quarter’s production can be used to meet demand for the current quarter (as well as future quarters). During the quarter immediately preceding quarter 1, 500 Mondos were produced. Assume that at the beginning of quarter 1, no Mondos are in inventory.
a. Determine how to minimize Mondo’s total cost during the next four quarters.
b. Use SolverTable to determine how Mondo’s optimal production schedule would be affected by a change in the cost of increasing production from one quarter to the next.
c. Use SolverTable to determine how Mondo’s optimal production schedule would be affected by a change in the cost of decreasing production from one quarter to the next.
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