ABC Company makes a production plan for the next year, gives its sales forecast for the next
Question:
ABC Company makes a production plan for the next year, gives its sales forecast for the next year as follows:
Quarter 1 2 3 4 Total Sales Forecast (units)
9.000 12.000 16.000 12.000 49.000
Currently, there are 12 employees in the company, each of whom produces as much as he produces himself.1,000 units per quarter and $2,000 per quarter.
The firm estimates the cost of carrying inventory is $2 per unit of inventory ending quarterly, and hiring or firing costs are $1,600 per employee. The company currently has an inventory of 1,000 units and intends to have an inventory of 1,000 units by the end of next year. The company does not plan to experience stock shortages.
Required
a) Using a chase strategy, calculate the labor level for each quarter and the total cost for the next year (labor cost, hiring cost, layoff costs and inventory carrying cost).
b) Using a level strategy, set a fixed level of workforce and the total cost for the next year.
c) Using Excel Solver, determine the optimal plan and the total cost for next year.
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi