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The S&OP team at Kansas Furniture has received estimates of demand requirements as shown in the table. Assuming stock out costs for lost sales of $125 per unit, inventory carrying costs of $20 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis:
Plan B: Vary the workforce to produce the prior month's demand. The firm produced 1,300 unit in June. The cost of hiring additional workers is $30 per unit produced. The cost of layoffs is $65 per unit cut back. (Enter all responses as a whole numbers.)
Note: Both hiring and layoff costs are incurred in the month of the change (i.e. going from production of 1,300 in July to 1,000 in August requires a layoff ( and related costs) of 300 units in August).
Month Demand Production Hire(units) Layoff(units) Ending Inventory Stockout
July 1000
August 1200
September 1400
October 1800
November 1800
December 1800
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