Problem 13-4 The current aggregate demand requirements for a firm are shown belo
ID: 335173 • 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 Cemand 140 120 120 120 150 170 The firm always plans to meet all demand. The firm currently has 140 workers capable of producing 140 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 $100 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 $3,100 per unit. Assume hiring and layoft tiring, if necessary, occur at the beginning of the month a. What should the aggregate plan be if the inventory holding cost is to be minimized? (Leave no cells blank be certain to enter "O" wherever required.) Hire Fire Workers May June July August 140 120 120 120 150 170 820 140 120 120 120 150 170 820 October Total b. What is the cost of this plan?Explanation / Answer
a.
b.
Total cost = Production cost + Inventory holding cost + hiring cost + firing cost
= 3100x820 + 240x100 + 50x600+20x1200
= 1612000+24000+30000+24000
= 1690000
Month Demand Regular production Ending inventory No. of workers Hire Fire May 140 140 40 140 0 0 June 120 120 40 120 0 20 July 120 120 40 120 0 0 August 120 120 40 120 0 0 September 150 150 40 150 30 0 October 170 170 40 170 20 0 Total 820 820 240 820 50 20