Question

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 80,000 units. The firm has 250 production days per year. In January, which has 20 production days, demand is estimated to be 8,000 units. Which of the following is correct?

• A. the firm must hire workers between December and January
• B. level production of 320 units per day is below the January requirement
• C. the January requirement is below level production of 400 units
• D. level production is approximately 400 units per day
• E. level production is approximately 500 units per day

Answer 1

Answer:

The correct option is “B. level production of 320 units per day is below the January requirement”.

Annual demand = 80000 units

Production days per year = 250 days

January demand = 8000 units

Number of production days in January = 20 days

As per the above days,

January per day requirement = January demand / Number of production days in January = 8000/ 20 = 400 units

However, the level production for the year = Annual demand / Production days per year = 80000 / 250 = 320 units

So, level production of 320 units per day is below the January requirement.

Other options are incorrect as:

A. the firm must hire workers between December and January – No productivity of workers is mentioned, so incorrect.

C. the January requirement is below level production of 400 units – As calculated above Jan requirement is 400 per day, so this statement is incorrect.

D. level production is approximately 400 units per day – As 400 units times 250 days = 100000 units which is more than annual requirement, so incorrect.

E. level production is approximately 500 units per day – As 500 units times 250 days = 125000 units which is more than annual requirement, so incorrect.