Question

Togo makes riding lawn mowers and tractors. The company’s expected quarterly demand is given below in the chart. The company will have 300 mowers in inventory at the beginning of the month and desires to maintain at least that number at the end of each month. Below is other critical data:

Production cost per unit = $325

Inventory carrying cost per month per unit = $60 (based on ending month inventory)

Hiring cost per worker = $450

Firing cost per worker = $900

Beginning number of workers = 40

Each worker can produce 150 units per quarter.

Level Plan
Quarter	Demand	Regular Production	Ending Inventory	Workers Required	Hire	Fire
1	5,000
2	9,000
3	7,000
4	9,000
Total	30,000
Chase Plan
Quarter	Demand	Regular Production	Ending Inventory	Workers Required	Hire	Fire
1	5,000
2	9,000
3	7,000
4	9,000
Total	30,000

Complete the tables and calculate the cost of the two plans.

Answer 1

Level Plan Regular Ending Workers rter Demand Hire Fire Production Inventory Required 5,000 9.000 7,000 9.000 30,000 7500 7500 7500 7500 30,000 2,800 1,300 1,800 10 2 50 50 4 Total 6,200 10 Production Cost Inventory cost Hiring cost Firing cost Total 9750000 372000 4500 0 10126500 Chase Plan Ending WorkersHire Regular Production Inventory Required rter Demand Fire 5,000 9,000 7,000 9,000 30,000 2 60 47 60 27 7000 13 13 40 Total 30,000 1,200 20 Production Cost Inventory cost Hiring cost Firing cost Total 9750000