Question: The workforce of a shoe making company can vary the workforce to accommodate demand. The forecast demand (in units) for the next six months is as follows: 1400, 1600, 1800, 1800, 1600, 1400 all at the end of each month. The stockout cost of lost sales is $5000 per unit. There exists 200 units of beginning inventory at the start of January, with inventory carrying costs of $1000 per unit per month. Last month's (December) capacity was set at 1600 units per month. Determine the total six-month costs of pursuing each of the following plans:
A. Chase Strategy, where cost of hiring additional workers is 25,000 for every 100 units, while the cost of laying-off workers is $35,000 for every 100 units. There are no costs for idle time.