Reference no: EM132720207

Plan production for a four-month period: February through May. For February and March, you should produce to exact demand forecast. For April and May, you should use overtime and inventory with a stable workforce; stable means that the number of workers needed for March will be held constant through May. However, government constraints put a maximum of 5,000 hours of overtime labor per month in April and May (zero overtime in February and March). If demand exceeds supply, then backorders occur. There are 100 workers on January 31. You are given the following demand forecast: February, 80,000; March, 64,000; April, 100,000; May, 40,000. Productivity is four units per worker hour, eight hours per day, 20 days per month. Assume zero inventory on February 1.

Costs are:

hiring, $50 per new worker;

layoff, $70 per worker laid off;

inventory holding, $10 per unit-month;

straight-time labor, $10 per hour;

overtime, $15 per hour;

backorder, $20 per unit.

Problem 1: Find the total cost of this plan.