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A company currently has 100 items in inventory. The demand for the next four months is 500, 800, 900, and 300 units. Determine the monthly production rate if a level strategy is selected with the goal of ending the fourth month with 400 units in inventory.
a. 500 units/monthb. 700 units/monthc. 900 units/monthd. 1100 units/month

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Answer:

The monthly production rate if a level strategy is selected with the goal of ending the fourth month with 400 units in inventory is b. 700 units/month

Explanation:

If the company operates a level production stategy and aims to have 400 units at the ending of the fourth month, then;

Opening inventory will be 100 units and monthly movement will be as follows;

Month     Opening     Demand    Produce     Closing

  1              100            -500           700       =    300

   2            300           -800            700      =    200

   3           200           -900             700       =    0

   4              0            -300              700       =  400

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