posted by Anonymous .
Reboot, Inc. is a manufacturer of hiking boots. Demand for
boots is highly seasonal. In particular, the demand in the next year
is expected to be 3,000, 4,000, 8,000, and 7,000 pairs of boots in
quarters 1, 2, 3, and 4, respectively. With its current production facility,
the company can produce at most 6,000 pairs of boots in any
quarter. Reboot would like to meet all the expected demand, so it
will need to carry inventory to meet demand in the later quarters.
Each pair of boots sold generates a profit of $20 per pair. Each pair
of boots in inventory at the end of a quarter incurs $8 in storage
and capital recovery costs. Reboot has 1,000 pairs of boots in inventory
at the start of quarter 1. Reboot’s top management has
given you the assignment of doing some spreadsheet modeling to
analyze what the production schedule should be for the next four
quarters and make a recommendation.
(a) Visualize where you want to finish. What numbers will top
management need? What are the decisions that need to be
made? What should the objective be?
(b) Suppose that Reboot were to produce 5,000 pairs of boots in each
of the first two quarters. Calculate by hand the ending inventory,
profit from sales, and inventory costs for quarters 1 and 2.
(c) Make a rough sketch of a spreadsheet model, with blocks laid out for the data cells, changing cells, output cells and target cells