Determine the total cost of the plan

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Reference no: EM131872739

Question: The fabrication department of a furniture house is preparing aggregate plans for the next nine months. The forecast for demand is also obtained and tabulated as under:

Period	1	2	3	4	5	6	7	8	9	Total
Forecast	360	440	500	540	400	320	300	500	340	3700

The department strength is 30 full time employees, who are capable to produce 15units of output per period at a cost of $8 per unit. Inventory carrying cost is $6 per unit per period and backlog cost is $12 per unit per period. The HR department has submitted a proposal of hiring 3 persons to start working in period 1, one on temporary basis who will work only through period 5. This would cost $800 in addition to unit production cost.

Required: What is the rational for this plan?

Determine the total cost of the plan, including production inventory and back-order costs.

Reference no: EM131872739

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