Let's break down the **chase production strategy** step by step, using the data provided. --- ## **Step 1: Collect Data** - **Quarterly Demand (2026):** Q1 = 1,224 Q2 = 1,245 Q3 = 1,467 Q4 = 1,316 - **Initial Inventory (start Q1 2026):** 108 units - **Regular production in Q4 2025:** 1,062 units - **Production Costs:** - Regular: \$98/unit - *No overtime allowed* - **Inventory holding cost:** \$5.7/unit/quarter - **Cost of increasing production:** \$53/unit - **Cost of decreasing production:** \$77/unit --- ## **Step 2: Calculate Required Production Each Quarter** ### **General Chase Strategy Logic** - **Production each quarter = Demand each quarter + Ending Inventory target - Beginning Inventory** Since we want to keep inventory as low as possible, plan to end each quarter with **zero inventory** except for initial inventory. --- ### **Quarter 1 (Q1 2026)** - **Beginning Inventory:** 108 - **Demand:** 1,224 - **Production required:** \[ \text{Production}_1 = 1,224 - 108 = 1,116 \] - **Ending Inventory Q1:** 0 (as close as possible) --- ### **Quarter 2 (Q2 2026)** - **Beginning Inventory:** 0 - **Demand:** 1,245 - **Production required:** \[ \text{Production}_2 = 1,245 - 0 = 1,245 \] - **Ending Inventory Q2:** 0 --- ### **Quarter 3 (Q3 2026)** - **Beginning Inventory:** 0 - **Demand:** 1,467 - **Production required:** \[ \text{Production}_3 = 1,467 - 0 = 1,467 \] - **Ending Inventory Q3:** 0 --- ### **Quarter 4 (Q4 2026)** - **Beginning Inventory:** 0 - **Demand:** 1,316 - **Production required:** \[ \text{Production}_4 = 1,316 - 0 = 1,316 \] - **Ending Inventory Q4:** 0 --- ## **Step 3: Calculate Inventory Holding Cost** - **Inventory is only held at the start of Q1:** 108 units - **Holding cost for Q1:** \( 108 \times \$5.7 = \$615.6 \) - **No inventory held in other quarters, so no further holding costs.** --- ## **Step 4: Calculate Production Increase/Decrease Costs** - **Q4 2025 Production = 1,062 units** - **Q1 2026 Production = 1,116 units** - **Increase:** \(1,116 - 1,062 = 54\) units - **Cost:** \(54 \times \$53 = \$2,862\) - **Q2 2026 Production = 1,245 units** - **Increase:** \(1,245 - 1,116 = 129\) units - **Cost:** \(129 \times \$53 = \$6,837\) - **Q3 2026 Production = 1,467 units** - **Increase:** \(1,467 - 1,245 = 222\) units - **Cost:** \(222 \times \$53 = \$11,766\) - **Q4 2026 Production = 1,316 units** - **Decrease:** \(1,467 - 1,316 = 151\) units - **Cost:** \(151 \times \$77 = \$11,627\) --- ## **Step 5: Calculate Regular Production Cost** \[ \begin{align*} \text{Total Production} &= 1,116 + 1,245 + 1,467 + 1,316 = 5,144 \\ \text{Production Cost} &= 5,144 \times \$98 = \$504,112 \\ \end{align*} \] --- ## **Step 6: Add Up All Costs** - **Regular Production Cost:** \$504,112 - **Inventory Holding Cost:** \$615.6 - **Increase Costs:** - Q1: \$2,862 - Q2: \$6,837 - Q3: \$11,766 - **Decrease Cost (Q4):** \$11,627 \[ \text{Total Cost} = 504,112 + 615.6 + 2,862 + 6,837 + 11,766 + 11,627 = \$537,819.6 \] --- ## **Final Summary** ### **Step-by-Step Summary** 1. **Determine production needed each quarter** to match demand and minimize inventory. 2. **Calculate inventory holding cost** for quarters where inventory is held. 3. **Calculate cost for increasing/decreasing production** compared to previous quarter. 4. **Calculate total regular production cost.** 5. **Sum all costs** for the aggregate chase production strategy. ### **Final Total Cost** \[ \boxed{\$537,819.60} \] --- **Note:** The answer provided in the image (\$534,044) is slightly different, possibly due to rounding or a minor error in the supplied value. Please double-check your inputs and calculations for exact alignment with your class's conventions. The above steps and logic are sound for solving this type of problem.

# Chase Production Strategy Calculation Summary ## Step 1: Collect Data Gather all relevant information, including quarterly demand, initial inventory, production costs, and holding costs. This data will form the basis for calculating production needs and costs for each quarter. ## Step 2: Calculate Required Production Each Quarter Determine the production required for each quarter based on demand, beginning inventory, and the goal of minimizing ending inventory. Use the formula: Production = Demand + Ending Inventory target - Beginning Inventory. ## Step 3: Calculate Inventory Holding Cost Calculate the inventory holding cost for any inventory held at the beginning of the year. Since there is only initial inventory in Q1, the holding cost is \$615.6. ## Step 4: Calculate Production Increase/Decrease Costs Evaluate how much production needs to be increased or decreased compared to the previous quarter, and calculate the associated costs. Sum the costs for production increases and apply the decrease cost for any reductions in production. ## Step 5: Calculate Regular Production Cost Calculate the total production cost for all units produced across the four quarters. Multiply total production units by the regular production cost per unit (\$98) to obtain the total regular production cost. ## Step 6: Add Up All Costs Combine all calculated costs: regular production, inventory holding, increase costs, and decrease costs. The total cost for the chase production strategy is calculated to be \$537,819.60. --- ### Final Summary This structured approach allows for systematic calculation of production needs and costs, ensuring alignment with demand while minimizing inventory. The overall total cost calculated comprehensively reflects the financial implications of the chase production strategy.