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The forecast for monthly demand is given below. On average there are 22 production days in a month. It takes one worker three days to complete one unit. The current production work force level is 50 employees. The cost of hiring an employee is $500, and the cost of firing an employee is $450. Regular time pay per employee is $1,250 per month.
The cost to hold an ending inventory for a month is $4 per unit. The current level of inventory is 800 units. As protection against unforeseeable demand fluctuations, the ending inventory for each month is planned at no less than but as close as to 800 units.
Develop separate production plans for chase and level strategies.
What is the cost over 12 periods for each plan? Which plan is better?
Planning Period
1
2
3
4
5
6
7
8
9
10
11
12
Monthly Demand
372
414
395
381
418
359
386
398
409
417
421
425
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