Question

A firm must plan production for the next six months. Each unit costs $430 to produce and it has an inventory holding cost of $15 per unit per month based on ending inventory levels. The cost to hire a worker is $280, and the cost to fire a worker is $560 per worker. Each worker produces 10 units per month. There are 20 persons on the payroll at the beginning of the first month. The company currently has 150 units of Inventory in stock, and it wants to keep at least this many units as safety stock at the end of every month. Assume hiring and layoff/firing. If necessary, occur at the beginning of the month. Month Demand 1 370 2 370 3 370 4 370 5 420 6 580 DpictureClick here for the Excel Data File a. From the information given above, compute the average of the 6 periods of demand. That will be the level production rate. Use that level production rate in the plan below, and fill in the table to show how demand will be met for the next six months. (Leave no cells blank - be certain to enter "0" wherever required.) res Level Plan Month Demand Regular Production Ending Inventory Number of Workers Wire Fire 370 370 370 500 2.400 Total 0 0

Answer 1

PART 1

Month	Demand	Regular production	Ending inventory	Number of workers	Hire	Fire
1	370	200	150	20	17	0
2	370	370	150	37	0	0
3	370	370	150	37	0	0
4	370	370	150	37	0	0
5	420	370	150	37	5	0
6	500	420	150	42	8	0
	2400	2100	900		30	0

PART 2

Regular production cost =		2100*430=	$     903,000.00
Inventory holding cost =		900*15=	$        13,500.00
Hiring cost =		30*280=	$          8,400.00
Total production cost			$     924,900.00