Question

The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of

$125125

per unit, inventory carrying costs of

$2525

per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:Plan B: Vary the workforce to produce the prior month's demand. The firm produced

1 comma 3001,300

units in June. The cost of hiring additional workers is

$3030

per unit produced. The cost of layoffs is

$6060

per unit cut back.

(Enter

all responses as whole numbers.) Note: Both hiring and layoff costs are incurred in the month of the change (i.e., going from production of

1 comma 3001,300

in July to

10001000

in August requires a layoff (and related costs) of

300300

units in August).

	Month	Demand	Production	Hire (Units)	Layoff (Units)	Ending Inventory	Stockouts (Units)
1	July	10001000	1,3001,300	00	00	300300	00
2	August	12001200	10001000	00	300300	100100	00
3	September	14001400	12001200	200200	00	00	100100
4	October	18001800	14001400	200200	00	00	400400
5	November	18001800	18001800	400400	00	00	00
6	December	18001800	18001800	00	00	00	00

The total hiring cost =

$24,00024,000.

(Enter your response as a whole number.)The total layoff cost =

$18,00018,000.

(Enter your response as a whole number.)The total inventory carrying cost =

$10,00010,000.

(Enter your response as a whole number.)The total stockout cost =

$62,50062,500.

(Enter your response as a whole number.)The total cost, excluding normal time labor costs, for Plan B =

$114,500114,500.

(Enter your response as a whole number.)

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Answer 1

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