MR is a manufacturer of industrial fridges, freezes* and air conditioners. In December, the production planner needs to submit a production plan to the plant manager for the next year. The aggregate forecasts for demand for each quarter of next year are Ql: 14,800, Q2: 26,400; Q3: 3 5,000, and Q4: 19,200 units. Tire beginning inventory in January is expected to be 0, and the year-end inventory in December of next year can be 0. It costs MR $24 per appliance to hold it in inventory for one quarter. Shortages (demand not met) are undesirable. Assume that any shortage will be backordered (met from future periods), and that backorder cost is $ 100 per unit per quarter. There are 160 permanent workers who produce 19,200 units per quarter, [n busy quarters, they can produce up to 9,600 additional units during overtime. Regular-time labour cost is $60 per unit and overtime labour cost is $8 3 per unit. M R ca n hire u p to 160 temporary workers to work during a second shift. Assume temporary workers have the same productivity' and can produce up to 19,200 units per quarter. A unit produced by temporary workers also costs $60 in labour cost. However, there will be an extra hiring cost of $25 per unit produced by a newly hired temporary worker. There is no layoff cost.
a. If permanent workers are used for the next four quarters during regular time, how many units will MR be short at the end of the year and which quarters will it be short?
b. Meet units short by hiring temporary workers. Use trade-off analysis to choose the minimum cost plan in this case.
c. Would using overtime (in addition to some temporary production) be less expensive? Use trade-off analysts to choose the overall minimum cost plan.