A key hospital supplier, IVs Plus (IVP) located in Salina, KS sells IV tubing and stands to hospitals and clinics. Sales have picked up ever since they introduced their newest “Squeaky Clean” IV stand, which eliminates all oils and germs left behind by users. Though IVP sells these stands all year long, they sell the most during the summer months, when end-of-fiscal year purchases are at a peak. The demand over the next 12 months is shown in the table below. Use the demand forecasts and determine the lowest cost production plan.
Month Demand Forecast:
January 133,067 , February 155,026 , March 168,200 , April 173,890 ,
May 202,759 , June 260,842 , July 251,630 , August 249,630 ,
September 200,312 , October 160,830 , November 145,266 , December 128,900
Regular production cost $80 per unit
Holding cost $23 per unit per month based on ending inventory
Backorder cost $35.00 per unit per month based on ending inventory
Beginning Inventory 650,000 units
Beginning workforce 21 employees
Regular production rate 5,600 units per employee per month
Hiring cost $9,000 per worker
Firing cost $12,000 per worker
Assume negligible labor costs (i.e. each worker is paid zero dollars). Produce using a level production strategy using regular time production only. Backlogs are allowed in any month except December. Ending inventory is allowed in any month. Ending inventory for December should be as low as possible. How many units are produced for the year using regular time production?
A. Less than 1,200,000
B. Between 1,200,000 and 1,400,000
C. Between 1,400,001 and 1,600,000
D. More than 1,600,000
After hiring or firing any workers in the first month, how many workers are required throughout the year following the level production strategy?
A. 22
B. 23
C. 24
D. 25
What is the hiring or firing cost in the first month following the level production strategy?
A. Between $0 and $15,000
B. Between $15,001 and $25,000
C. Between $25,001 and $35,000
D. Between $35,001 and $45,000
What are the total costs incurred following the level production strategy?
A. Less than $190,000,000
B. Between $190,000,001 and 210,000,000
C. Between $210,000,001 and $220,000,000
D. Greater than $220,000,001