The president of Hill Enterprises, Terri Hill, projects the firm's 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
|
July
|
1,800
|
|
Apr.
|
1,800
|
Aug.
|
1,800
|
Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stock out 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 strategy that produces the quantity demanded in the prior month. The December demand and rate 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.