Based on the inventory on hand at the end of quarter

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Reference no: EM132132084

Demand by quarter : 1st- 3000 units, 2nd- 4000, 3rd- 4500, 4th-3500. ABC has traditionally used the hiring and firing of workers to accommodate the changes in demand for their products. However, they are considering maintaining a stable workforce and subcontracting production when demand exceeds the capability of the workforce. They currently have 30 workers, each capable of producing 100 units per quarter. It costs the $3000 to hire a worker, and $5000 to fire a worker. If they subcontract the work, it will cost them $30 per unit above their normal production cost. a. Given this information, should they continue their current practice or move to subcontracting the production over what their current workforce can produce? b. Use the data from above to consider another possibility. They could hire a set of 5 workers at the beginning of the year and build inventory. They could then use the inventory (and some subcontracting, if necessary) to deal with the quarters where demand exceeds production. Using this method, the inventory will cost them $15 per quarter based on the inventory on hand at the end of the quarter. Will this option be more OR less attractive than the alternatives considered in part (a)?

Reference no: EM132132084

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