When trying to cut backlog in a made-to-order manufacturing company, what annual production plan should be set if the target is to reduce backlog from four months to two months with an annual demand of 120 units?

To determine the appropriate annual production plan for reducing backlog from four months to two months in a made-to-order manufacturing company, it's essential to understand the implications of backlog and how it relates to production planning.

In this scenario, the annual demand is 120 units. With an existing backlog of four months, the company currently has excess demand for two additional months beyond its immediate production capacity. By aiming to reduce that backlog to two months, the company effectively wants to eliminate two months' worth of excess inventory in the production schedule.

Given the annual demand of 120 units, this equates to a monthly demand of 10 units (120 units/12 months). As the company moves to reduce its backlog by two months, it needs to account for the two months of demand in addition to the normal annual demand. Therefore, the company would need to produce enough to cover both the annual demand and the demand corresponding to the backlog that needs to be cleared.

To eliminate the backlog, the production plan must account for the 20 units that represent the two months of excess demand (10 units/month * 2 months), along with the 120 units for the annual demand. This brings the total production requirement to 140 units for the year (120 units +