The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next...

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

Dec 1,600 Jan. 1,400 May 2,200 Feb. 1,600 June 2,200 Mar. 1,800 July 1,800 Apr. 1,800 Aug. 1,800.

Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stockout cost of lost sales is $100 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 “chase” strategy by producing 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 $5,000 per 100 units. The cost of laying off workers is $7,500 per 100 units. Evaluate this plan. PX 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.

If demand is more than production and there is no inventory, then you will have stockout for that month.

Total costs = $43,000

Total costs = $153,000

Total costs = $135,000

Total costs = $28,000

Total costs = $85,000

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Expert Solution

ANSWER: $ 153,000

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EXCEL FORMULA:

keosha answered 8 months ago

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