TGS-2021002744: If Hakan wanted to increase the production of any

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If Hakan wanted to increase the production of any product, which one would you recommend? Why?

Question 2

Inventory holding cost is one of the highest costs a company incurs. Therefore, companies always try to reduce inventory costs by implementing appropriate strategies. One such company is Pepsico Foodservice. Pepsico is trying to control inventory costs for one of its products: Lay’s chips. The weekly cost of holding one carton of chips is $25. Based on the past data, it was estimated that the weekly demand for Lay’s chips averaged 120 units, with a standard deviation of 25 units. If the demand for the chips is more than the items on hand, customers would choose to buy a different brand of chips. The production facility at Batam can change its production to 3 quantities only — 100, 120, and 150 cartons per week. But changing the production quantity is expensive; it costs $3,000 to change the production quantity.

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