Question

The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demanc requirements over the next 8 months as fol lows: 2,200 2,100 1,700 1,700 January February March April 1,500 1,500 1,600 1,900 May June uly August Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is S25 per unit per month. Ignore any idle-time costs. The plan is called plan A. Plan A: Vary the workforce level to execute a strategy that produces the quantity demanded in the pnor month. The December demand and rate of production are both 1,600 units per month. The cost af hiing additional workers is $50 per unit. The cost of laying off workers is S75 per unit. Evaluate this plan. (Enter all responses as whole numbers.) Note: Both hining and layoff costs are incurred in the month of the change. For example, going from 1,600 in January to 1,500 in February incurs a cost of layoff for 100 units in February. Ending Hire Layoff Units Stockouts PeriodMonth Demand Production nits Inven nits 1,600 1,600 1,500 1,500 1,600 1,900 2,200 2,100 1,700 0 December 1,600 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 Augus: 200 1,500 1,500 1,600 1,900 2,200 2.100 1,700 1,700

Answer 1

Ending inventory of January =Ending inventory of December+Production-Demand

Stock out occurs when Demand >Production+ ending inventory

(Stockout =Demand-(Production+ending inventory))

All costs are calculated for the months Jan-aug except Inventory holding cost.

Total hiring cost =SUM(E4:E11)*50=$ 35000

Total Layoff cost =SUM(F4:F11)*75=$ 45000

Total inventory holding cost=SUM(G3:G11)*25=$ 52500

( includes December cost also)

Total stock out cost=SUM(H4:H11)*100=$ 40000

Total cost =SUM(E13:H13)=$ 172500

Calculations are as shown below :

SUM(E13:H13) В 15 Ending Stockouts Demand Production Hire(Units) Layoff(Units) Inventory (Units) 2 PeriodMonth 0 December 1 Janua 2 Februa 3 March 4 April 5 May 6 June 7 Jul 8 August 1600 1600 4 1600 100 0 0 100 1600 0 1600 100 1900 2100 1700 1700 100 10 2100 100 1700 400 500 12 13 Cost 14 15 Total cost 172500 52500 16 17