Question

The president of Hill​ Enterprises, Terri​ Hill, projects the​ firm's aggregate demand requirements over the next 8 months as​ follows:

January	1,200	May	2,300
February	1,600	June	2,200
March	1,800	July	1,800
April	1,700	August	1,800

Her operations manager is considering a new​ plan, which begins in January with

200 units of inventory on hand. Stockout cost of lost sales is

​$100 per unit. Inventory holding cost is

​$25 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

​$55per unit. The cost of laying off workers is

​$75 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

1,600

in January to

1,200

in February incurs a cost of layoff for

400

units in February.

                                                                                                                                                               

Period	Month	Demand	Production	Hire ​(Units)	Layoff ​(Units)	Ending Inventory	Stockouts ​(Units)
0	December	1,600	1,600	x	x	200	x
1	January	1,200	1,600	x	x	x	x
2	February	1,600	1,200	x	x	x	x
3	March	1,800	1,600	x	x	x	x
4	April	1,700	1,800	x	x	x	x
5	May	2,300	1,700	x	x	x	x
6	June	2,200	2,300	x	x	x	x
7	July	1,800	2,200	x	x	x	x
8	August	1,800	1,800	x	x	x	x

Enter your answer in the edit fields and then click Check Answer. (solve for all x's)

total overtime production cost?

total inventory holding cost for january through august?

total stockout cost?

the total cost, excluding normal time labor costs?

Answer 1

Period	Month	Demand	Production	Hire Units	Layoff Units	Ending Inventory	Stock Outs
0	December	1600	1600	0	0	200	0
1	January	1200	1600	0	0	600	0
2	February	1600	1200	0	400	200	0
3	March	1800	1600	400	0	0	0
4	April	1700	1800	200	0	100	0
5	May	2300	1700	0	100	0	500
6	June	2200	2300	600	0	0	400
7	July	1800	2200	0	100	0	0
8	August	1800	1800	0	400	0	0

Total Overtime Production Cost = $ 66,000

Total Inventory Holding Cost from Jan-Aug = $ 22,500

Total Stock Out Cost = $ 90,000