The president of Hill Enterprises, Terri Hill, projects the firm\'s aggregate de

Question

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1 comma 4001,400 May 2 comma 2002,200 February 1 comma 6001,600 June 2 comma 2002,200 March 1 comma 8001,800 July 1 comma 8001,800 April 1 comma 8001,800 August 1 comma 8001,800 Her operations manager is considering a new plan, which begins in January with 200200 units of inventory on hand. Stockout cost of lost sales is $100100 per unit. Inventory holding cost is $2020 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 comma 6001,600 units per month. The cost of hiring additional workers is $5050 per unit. The cost of laying off workers is $7575 per unit. Evaluate this plan. (Enter all responses as whole numbers.) Note: Both hiring and layoff costs are incurred in the month of the change. For example, going from 1 comma 6001,600 in January to 1 comma 4001,400 in February incurs a cost of layoff for 200200 units in February.

Explanation / Answer

Total cost of the plan is $ 140,000

Detailed working is given below

Month Demand On-Hand Inventory Production Hire Layoff Cost Dec 1600 Jan 1400 200 1200 400 30000 Feb 1600 1600 400 20000 Mar 1800 1800 200 10000 Apr 1800 1800 0 May 2200 2200 400 20000 Jun 2200 2200 0 Jul 1800 1800 400 30000 Aug 1400 1400 400 30000 140000

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