Management at the Davis Corporation has determined the following demand schedule (in units:

An employee can produce an average of 10 units per month. Each worker on the payroll costs $2,000 in regular-time wages per month. Under time is paid at the same rate as regular time. In accordance with the labor contract in force, Davis Corporation does not work overtime or use subcontracting. Davis can hire and train a new employee for $2,000 and lay off one for $500. Inventory costs $32 per unit on hand at the end of each month. At present 140 employees are on the payroll and anticipation inventory is zero.
a. Prepare a production plan using a mixed strategy that only uses a level workforce and anticipation inventory as its supply options. Minimize the inventory left over at the end of the year. Layoffs under time, vacations subcontracting, backorders, and stock outs are not options. The plan may call for a one-time adjustment of the workforce before month 1.
b. Prepare a production plan with the chase strategy relying only on hires and layoffs.
c. Compare and contrast these two plans on the basis of annual costs and other factors that you believe to be important.
d. Propose a better plan than these two plans, and explain why you believe it isbetter.

Transcribed Image Text:

Month Demand Month Demand Month Demand 500 800 1,000 1,400 2,0001,600 1,4001,200 12 1.000 2,400 3,000,000 g 10 11