# Jones Inc. is preparing an aggregate production plan for next year. The company expects demand to be 1,000 units in

## Question:

Jones Inc. is preparing an aggregate production plan for next year. The company expects demand to be 1,000 units in quarter 1; 2,000 units in quarter 2; 4,000 units in quarter 3; and 3,000 units in quarter 4. The company will have 100 units in inventory at the beginning of the year and desires to maintain at least that number at the end of each quarter as safety stock. Other information:

Regular production labor cost = \$100 per unit

Overtime production cost per unit = \$150

Inventory carrying cost = \$25/unit/quarter based on quarter-ending inventory

Hiring Cost = \$2,000 per worker

Firing/layoff cost = \$3,000 per worker

Beginning # of workers = 15

Each worker can produce 100 units per quarter.

a. What is the total cost of a level plan?

b. What is the total cost of a chase plan utilizing hiring and firing?

c. Suppose Jones management is reluctant to constantly change the workforce by hiring and firing. The company decides to hire 7 additional workers at the beginning of the year. The company will build inventory in low demand months and use it in high demand months. In addition, if necessary, overtime will be used to meet demand requirements if there is not sufficient inventory available. What is the total cost of this plan?

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...

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Related Book For

## Managing Operations Across the Supply Chain

ISBN: 978-0078024030

2nd edition

Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley

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