Assignment:
Develop a Chase Strategy and a Level Strategy based on the following information. The Level Strategy requires the use of a constant workforce equal to the requirement of the minimum expected demand: overtime must be used for additional capacity. Twenty workers worked during February. Illustrate and explain which is the best plan.
March April May June
Beginning Inventory 300 0 250 100
Demand Forecast 1500 1500 1200 1000
Number of Working Days by Month 21 20 21 22
Costs
Materials $15000 s per unit
Inventory holding cost $5.50 per unit per month
Marginal cost of stockout 25.00 $ per unit per month
Marginal cost of subcontracting $60.00
Hiring and training cost $3500.00 S per worker
Layoff cost $5000.00 per worker
Labor hours required per unit 250 per unit
Straight-line cost (first eight hours each day) $10.00
Overtime cost 25.00 s per hour