Beth's Broasted Chicken shop offers a variety of fast-food items. Beth uses regular and part-time workers to meet demand. The demand for the next 12 months has been forecast in thousands of dollars, as follows:
Assume that each employee can produce $5000 worth of demand in a month. The company pays regular workers $10 per hour, including benefits, and part-time workers $7 per hour. Management would like to use as many part-time workers as possible but must limit the ratio to one regular worker to one part-time worker to provide adequate supervision and continuity of the workforce.
Demand cannot be inventoried and must be met on a month-by-month basis. It costs $500 to hire and $200 to lay off a regular worker. No costs are associated with hiring and laying off part-time workers. A maximum of 20 percent slack is allowed in months when the company would prefer not to lay off people and rehire them in the following months. In other words, the regular and part time workforce cannot exceed 120 percent of demand in any particular month.
Develop a strategy for this problem by using the maximum amount of part-time workers and by not laying off people when they would be needed the following month. What is the cost of this strategy?