Aggregate demand for a product family is given in the table below for the four quarters of 2007. Production cost on regular time is \$3 per unit. Labor fluctuation costs are accounted for by costs of changes in production level: each unit of increase in production is accounted for at \$1 per unit of increase and \$2 per unit of decrease. The inventory cost is \$1 per unit per quarter. When necessary, up to 100 units can be subcontracted at a cost of \$5 per unit. Demand that cannot be met is a lost sale and accounted for at \$10 per unit.The aggregate planning technique being considered is level production. That is, the production level is the same for each quarter. Computer the total annual cost of meeting demand for 2007.
Aggregate demand for a product family is given in the table below for the four quarters of 2007.Production cost on regular time is \$3 per unit. Labor fluctuation costs are accounted for by costsof changes in production level: each unit of increase in production is accounted for at \$1 per unitof increase and \$2 per unit of decrease. The inventory cost is \$1 per unit per quarter. Whennecessary, um 100 units can be subcontracted at a cost of \$5 per unit. Demand that cannot bemet is a lost sale and accounted for at \$10 per unit. _ Production Production Subcontracted LostQuarter Demand Production _ InventoryIncrease Decrease Unlts SaleQ4 06 900 0Q1 07 1000 ? 7 7 ? ? ?Q2 07 300 ? 7 7 ? ? ?Q3 07 800 ? 7 7 ? ? ?Q4 07 400 ? 7 7 .7 ? ? The aggregate planning technique being considered is level production. That is, the productionlevel is the same for each quarter. Compute the total annual cost of meeting demand for 2007.(Determine the number of units to produce in each month (sum of demand minus initial inventory,divided WM). Then for each month, compute the changes in productive level, the number ofunits to be subcontracted, ending inventory, and the lost sales). Answer: