Question

Plan B: Vary the workforce to produce the prior month's demand. The firm produced 1,300 units in June. The cost of hiring additional workers is $35 per unit produced. The cost of layoffs is $60 per unit cut back. (Enter all responses as whole numbers.) Note: Both hiring and layoff costs are incurred in the month of the change (i.e., going from production of 1,300 in July to 1200 in August requires a layoff (and related costs) of 100 units in August). Hire (Units) Production Layoff (Units) Ending Inventory Stockouts (Units) Month 1 July 2 August 3 September 4 October 5 November 6 December Demand 1200 1300 1200 1700 1650 1650

Answer 1

Production = Demand

Hire = max (Production_t - Production_t-1, 0)

Workforce is fired when production in the current period is lower than in last period

Hence, Fire = max (Production_t-1 - Production_t, 0)

Ending Inventory_t = max ( Ending Inventory_t-1 + Production - Demand , 0)

Stockouts occur when production and previous inventory is not able to fulfill the demand

Hence, Stockouts = max (Demand - Production - Ending Inventory_t-1 , 0)

Calculating using the above formula

Period	Month	Demand	Production	Hire	Fire	Ending Inventory	Stockouts
0			1300
1	July	1200	1200	0	100	0	0
2	August	1300	1300	100	0	0	0
3	September	1200	1200	0	100	0	0
4	October	1700	1700	500	0	0	0
5	November	1650	1650	0	50	0	0
6	December	1650	1650	0	0	0	0
Total		8700	8700	600	250	0	0

Cost of Hiring = Hired Units * Per unit cost of hiring = 600*35 =  $21000

Cost of Firing = Fired Units * Per unit cost of firing = 250*60 =  $15000