Question

The president of Hill​ Enterprises, Terri​ Hill, projects the​ firm's aggregate demand requirements over the next 8 months as​ follows:

January	1,400	May	2,300
February	1,700	June	2,200
March	1,800	July	1,700
April	1,800	August	1,700

Her operations manager is considering a new​ plan, which begins in January with

200 units of inventory on hand. Stockout cost of lost sales is

​$125 per unit. Inventory holding cost is

​$20 per unit per month. Ignore any​ idle-time costs. The plan is called plan A.

Plan​ A: Vary the workforce level to execute a strategy that produces the quantity demanded in the prior month. The December demand and rate of production are both

1,600 units per month. The cost of hiring additional workers is $50 per unit. The cost of laying off workers is

​$80 per unit. Evaluate this plan.

​(Enter all responses as whole numbers​.)

​Note: Both hiring and layoff costs are incurred in the month of the change. For​ example, going from

1,600 in January to

1,400 in February incurs a cost of layoff for

200 units in February.

                                                                                                                                                               

Period	Month	Demand	Production	Hire ​(Units)	Layoff ​(Units)	Ending Inventory	Stockouts ​(Units)
0	December	1,600	1,600			200
1	January	1,400	1,600
2	February	1,700	1,400
3	March	1,800	1,700
4	April	1,800	1,800
5	May	2,300	1,800
6	June	2,200	2,300
7	July	1,700	2,200
8	August	1,700	1,700

Answer 1

Plan A:

Calculations:

Total cost = 900*$50 + 800*$80 + 1800*$20 + 500*$125 = $207,500