The president of Hill Enterprises, Terri Hill, projects the firm?s aggregate demand requirements over the next 8
Question:
The president of Hill Enterprises, Terri Hill, projects the firm?s aggregate demand requirements over the next 8 months as follows:
Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stock out 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 lying off workers is $7,500 per 100 units. Evaluate this plan.
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.
Problem: 13.5
Hill is now considering plan C: Keep a stable workforce by maintaining a constant production rate equal to the average requirements and allow varying inventory levels. Beginning inventory, stock out costs, and holding costs are provided in Problem 13.3.