Reference no: EM131338051

A company produces to a seasonal demand, with the forecast for the next 12 months as given below.

Month	Demand
January	600
February	700
March	800
April	700
May	600
June	500
July	600
August	700
September	800
October	900
November	700
December	600

The present labor force can produce 500 units per month. Each employee added can produce an additional 20 units per month and is paid $1000 per month. The cost of materials is $30 per unit. Overtime can be used at the usual premium of time and a half for labor up to a maximum of 10 percent per month. Inventory-carrying cost is $50 per unit per year. Changes in production level cost $100 per unit due to hiring, line changeover costs, and so forth.

Assume 200 units of initial inventory. Extra capacity may be obtained by subcontracting at an additional cost of $15 per unit over and above the company's producing them itself on regular time.

• Provide a detailed cost breakdown for using a level vs. a chase strategy to meet the increased demand.
• Which strategy do you recommend?
• How much savings would result from the plan you recommend?

For assistance with assignment, use your text, Web resources, and all course materials.