Reference no: EM133269663

Question: Suzie's Sweatshirts is a home-based company that makes upscale, hand-painted sweatshirts for children. Forecasts of sales for the next year are 125 in the autumn, 250 in the winter, and 75 in the spring. Shirts are purchased for $15. The cost of capital is 24% a year (or 6% per quarter); thus, the holding cost per shirt is 0.06*15 = $0.90 per quarter. (In other words, if you produce one extra unit in autumn and carry it to winter, you incur $0.90. If you produce one extra unit in autumn and carry it to spring, you incur $1.80.) Suzie hires part-time workers to paint the shirts during the autumn, and they earn $4.50 per hour. Because of the high demand for part-time help during the winter holiday season, labor rates are higher in the winter, and Suzie must pay the workers $6.00 per hour. In the spring, labor is more difficult to keep, and Suzie finds that she must pay $5.50 per hour to get qualified help. Each shirt takes 1.5 hours to complete.

How should Suzie plan production over the three quarters to minimize the combined production and inventory holding costs? Assume you can buy/make/sell/process any fraction of a unit. Decimal answers are fine. Do not round up or down. Do not force integer answers.