A manager faces peak [weekly] demand for one of her operations, but is not sure how long the peak will last. She can either use overtime from the current workforce, or hire/lay off and just pay regular-time wages. Regular-time pay is $500 per week, overtime is $750 per week, the hiring cost is $2,000, and the layoff cost is $3,000. Assuming that people are available seeking such a short-term arrangement, how many weeks must the surge in demand last to justify a temporary hire? Hint: Use break-even analysis. Let w be the number of weeks of the high demand (rather than using Q for the break-even quantity) what is the fixed cost for the regular-time option? Overtime option?
The book gives the formula as:
Total cost = F + cQ
How do you figure out from the numbers that are given, break-even analysis for fix-cost regular-time and overtime?