Problem 2. You are supplied with a monthly demand forecast, an organizational policy of requiring 10% of a month's forecast as safety stock, and the number of operating days available each month. There is no inventory available at the beginning of the first month, January. The following table contains the demand requirements. January February March April May June 1. Beginning inventory 0 1,000 1,500 3,000 2,700 3,000 2. Forecasted demand 10,000 15,000 30,000 27,000 30,000 16,000 3. Safety Stock 1.000 1,500 3,000 2,700 3,000 1,600 4. Production requirements (2+3-1) 11,000 15,500 31,500 26,700 30,300 14,600 5. Operating days 22 19 21 22 20 6. Cunnilative forecasted 10,000 25,000 55,000 82,000 112,000 128,000 demand 7. Cumulative production 11,000 26,500 58,000 84,000 115,000 129,600 requirements 8. Cumnlative operating 22 41 62 83 105 125 days 21 The costs for the organization are as follows: Manufacturing cost/unit Inventory holding cost Hourly wage rate Stockout cost per unit Hourly overtime wage rate Subcontracting cost/unit Labour hours/unit Layoff cost/worker Hiring and training cost/worker Rs.100 Rs.2.00/unit-month Rs.8.00 Rs.5.00 150%, or Rs.12.00 Rs. 104 4 hours Rs.500 Rs.400 22% of manufacturing cost per month. Three potential plans for the production are: 1. Produce to exact production requirements by varying the size of the work force on regular hours. Assume there are 250 workers available in January. 2. Maintain a constant work force of 518 workers. Assume no subcontracting is available and inventory will fluctuate with stockouts filled from the following month's production. 3. Produce with a fixed work force of 500 on regular time and subcontract all excess demand over the period of production. Inventory will increase when production exceeds demand; no stockouts are permitted