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Skycell, a major European cell phone manufacturer, is making production plans for the coming year. Skycell has worked with its customers (the service providers) to come up with forecasts of monthly requirements (in thousands of phones) as shown in the table below.

Monthly Demand for Cell Phones, in Thousands Month	Demand
January	1,000
February	1,100
March	1,000
April	1,200
May	1,500
June	1,600
July	1,600
August	900
September	1,100
October	800
November	1,400
December	1,700

Assume that the plant has 1,250 employees and a no-layoff policy. Overtime is limited to 20 hours per employee per month. A third party has offered to produce cell phones as needed at a cost of 26 euros per unit (this includes component costs of 20 euros per unit).

1. What is the average per unit cost of in-house production (including inventory holding and overtime cost) if the third party is not used?
2. How should Skycell use the third party? How does your answer change if the third party offers a price of 25 euros per unit?
3. Should Skycell use the third party if the per unit cost is 28 euros?
4. Why would Skycell use the third party even when the per-unit cost of the third party is higher than the average per-unit cost (including inventory holding and overtime) for in-house production?

Assume that the plant has 1,250 employees and a no-layoff policy. Overtime is limited to at most 20 hours per employee per month. Also assume no subcontracting option. Skycell has a team of 50 people who are willing to work as seasonal employees. The cost of bringing them on is 800 euros per employee, and the layoff cost is 1,200 euros per employee.

1. What is the optimal production, hiring, and layoff schedule?
2. How does the optimal schedule change if the seasonal pool grows from 50 to 100?
3. Relative to having 1,250 permanent and 50 seasonal employees, will Skycell gain significantly if it carries only 1,100 permanent employees but has 200 seasonal employees?
4. Consider the case in which Skycell has 1,250 permanent employees and 50 seasonal employees. Does Skycell gain more by eliminating its no-layoff policy for its permanent employees or by increasing the seasonal employee pool from 50 to 100? Assume that permanent employees can be hired or laid off at the same cost as the seasonal employees.