Problem 13-4 The current aggregate demand requirements for a firm are shown belo
ID: 327414 • Letter: P
Question
Problem 13-4 The current aggregate demand requirements for a firm are shown below for the next six months: Month May June July Aug Sept Oct Demand 360 340 340 340 3T0 390 The firm always plans to meet all demand. The firm currently has 360 workers capable of producing 360 units in a month (1 unit/worker). The workforce can be increased (at a cost of $600 per worker) or decreased (at a cost of $1,200 per worker), Inventory holding cost is $200 per unit per month. The firm currently has 40 units of inventory on hand, and it would like to have 40 units available at the end of each month. Regular production cost is $4,200 per unit. Assume hiring and layo/firing, if necessary, occur at the beginning of the month What should the aggregate plan be if the inventory holding cost is to be minimized? (Leave no cells blank - be certain to enter " wherever required.) Regular Ending Number of Month Demand May ??? Hire Fire 360 340 340 340 370 390 2.140 360 340 August September October Total 340 370 390 2.140 b. What is the cost of this plan?Explanation / Answer
Given:
Let us complete the following table with the information on hand without any criteria of minimizing it at first:
To meet the demand and to maintain a minimum the production will be only as much is required for that month. Therefore new table would look something like this:
Inventory holding cost: 40 units*200=Rs8000
Total cost of the plan= production cost+inventory cost+manpower cost
=(2140*4200)+($8000)+(100*600)+(40*1200)
=$9104000
Month Demand Regular Production Ending starting Inventory/ending inventory Inventory cost Number of workers Hire Fire May 360 360 40 =40*200=8000 360 0 0 June 340 340 40 8000 340 0 20 July 340 340 40 8000 340 0 0 August 340 340 40 8000 340 0 0 September 370 370 40 8000 370 30 0 October 390 390 40 8000 390 20 0 Total 2140 2140 48000 =50*600=30000 =20*1200=2