Question: A Company is interested in developing a quarterly aggregate production plan but they are not sure if a level strategy with backorders or a chase
A Company is interested in developing a quarterly aggregate production plan but they are not sure if a level strategy with backorders or a chase strategy would be better. They have the following information available regarding their production operation:
| Hiring workers | $40 per unit |
| Layoff workers | $80 per unit |
| Inventory holding Cost | $40 per unit per quarter |
| Stockout cost for backorders | $150 per unit |
| Production (Labor) cost | $30 per unit |
| Subcontracting cost | $60 per unit |
| Previous quarter's production | 1300 units |
| Beginning inventoy | 0 units |
Quarter forecasts are 2000, 6000, 4000, 5000, respectively.
This problem has 5 questions.
Suppose that you want to use a level plan with backorders (one that produces at the average demand over the four quarters). Answer the next two questions using this plan.
Do not round your intermediate calculations. Round your final answer to the nearest whole number.
What would be your production rate each month?
A.
4250, 3000, 4000, 5000
B.
2000, 6000, 4000, 5000
C.
4250
D.
3500
What is the ending inventory in Quarter 2
A.
0
B.
2250
C.
500
D.
2500
Suppose that you want to use a chase plan. Answer the next three questions using this plan.
Do not round your intermediate calculations. Round your final answer to the nearest whole number.
What is your production rate in quarter 2?
A.
4250
B.
6000
C.
2000
D.
4000
What is the hiring/layoff cost of quarter 3?
A.
0
B.
$28,000
C.
Insufficient information is provided
D.
$1,000
What is the labor cost of quarter 2?
A.
$120,000
B.
$70,000
C.
$180,000
D.
$60,000
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