The president of Hill Enterprises, Terri Hill, projects the firms aggregate demand requirements over the next 8 months as follows:
Jan : 1,400 May: 2,200
Feb:1,600 June: 2,200
Mar: 1,800 Jul : 1,800
Apr: 1,800 Aug: 1,400
Her operations manager is considering a new plan , which begins in January wiht 200 units on hand, Stockout cost of lost sales is $100 per unit, Inventory holding cost is $20 per unit per month. Ignore any idle time costs. The plan is called Plan A.
Plan A: Vary the workforce level to execute a chase strategy by producing the quantity demanded in the prior month. The December demand rates of production are both 1,600 units per month. The cost of hiring additional workers is $5,000 per 100 units. The cost of laying off workers is $7,500 per 100 units. Evaluate this plan.