Morton and Monson Inc. is a small of parts for the aerospace industry. The production capacity for the next four months is given as follows Production Capacity in Units Month Regular Production Overtime Production January 3,000 500 February 2,000 400 March 3,000 600 April 3,500 800 The regular cost of production is $500 per unit and the cost of overtime production is $150 per unit in addition to the regular cost of production. The company can utilize inventories to reduce fluctuations in production, but carrying one unit of inventory costs the company S40 per unit per month. Currently there are no units in inventory. However, the company wants to maintain a minimum safety stock of 100 units of inventory during the months of January, February, and March and wants to have 300 units in inventory at the end of April. The estimated demand for the next four months is as follows: January February March Month April 3,000 Demand 2,800 3,000 3,500 The production manager is in the process of preparing a four-month production schedule.
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