What is the optimal production schedule for the year

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Reference no: EM132189129

Frances, a company located in the Miluakee, is a major manufacturer of steel. the company is in the middle of the demand and supply planning exercise for the coming year and they need your help. Anticipated monthly demand from distributors over next 12 months is shown below.

                                    January            10,000             July                  30,000

                                    February          11,000             August            29,000

                                    March              15,000             September       21,000

                                    April                18,000             October           18,000

                                    May                 25,000             November       14,000

                                    June                 26,000             December        11,000

Capacity at this company is governed by the number of operators it hires. Frances works 20 days a month, with a regular operating shift of eight hours per day. Any time beyond that is considered overtime. Regular-time pay is $15 per employee and overtime is $22, both in an hourly basis. Overtime is limited to 20 hours per month per employee. The plant currently has 250 employees. Each product requires two hours of labor input. It costs $3 to carry the product in inventory for a month. Frances can change the size of the workforce by laying off or hiring employees. Hiring a new employee incurs a cost of $1,000, while laying off an employee incurs a layoff cost of $2,000. Frances starts the year with 5,000 product in inventory and wants to end the year with 5,000 units in inventory. Assuming that no stockouts are allowed and that no subcontracting is available, what is the optimal production schedule for the year? What is the cost of this plan?

Reference no: EM132189129

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