Problem 13-4 The current aggregate demand requirements for a firm are shown belo
ID: 339065 • Letter: P
Question
Problem 13-4
The current aggregate demand requirements for a firm are shown below for the next six months:
The firm always plans to meet all demand. The firm currently has 220 workers capable of producing 220 units in a month (1 unit/worker). The workforce can be increased (at a cost of $1,000 per worker) or decreased (at a cost of $2,000 per worker). Inventory holding cost is $150 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 $3,500 per unit. Assume hiring and layoff/firing, 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 "0" wherever required.)
Month May June July Aug Sept Oct Demand 220 200 200 200 230 250 ar ing nto MonthDemand May June Hire Fire Production Inve 220 200 200 200 230 250 1,300 Workers 220 200 200 200 230 250 1,300 August October Total 0 b. What is the cost of this plan? Total cost References Worksheet Difficulty: 2 Medium Problem 13-4 Learning Objective: 13-05 Develop alternative aggregate production plansExplanation / Answer
Please refer below table for necessary data which are self explanatory
Following to be noted :
30 people were again hired in September since production went up from 200 to 230 in September.
Further 20 people were hired in October since production went up from 230 to 250
Firing cost during any month = $2000 x Numbers fired
Regular production cost during any month = $3500 / unit x Regular production quantity
Month
Demand
Regular production
Ending inventory
Number of workers
Number hired
Hiring cost ( $1000/ worker)
Number fired
Firing cost ( $2000/ worker)
Regular Production cost ( $3500/ cost )
May
220
220
40
220
0
0
0
0
770000
June
200
200
40
200
0
0
20
40000
700000
July
200
200
40
200
0
0
0
0
700000
August
200
200
40
200
0
0
0
0
700000
September
230
230
40
230
30
30000
0
0
805000
October
250
250
40
250
20
20000
0
0
875000
Total:
50000
40000
4550000
Total cost of this plan
= Hiring cost + firing cost + Regular production cost
= $50,000 + $40,000 + $4550,000
=$4640,000
TOTAL COST = $4640,000
Month
Demand
Regular production
Ending inventory
Number of workers
Number hired
Hiring cost ( $1000/ worker)
Number fired
Firing cost ( $2000/ worker)
Regular Production cost ( $3500/ cost )
May
220
220
40
220
0
0
0
0
770000
June
200
200
40
200
0
0
20
40000
700000
July
200
200
40
200
0
0
0
0
700000
August
200
200
40
200
0
0
0
0
700000
September
230
230
40
230
30
30000
0
0
805000
October
250
250
40
250
20
20000
0
0
875000
Total:
50000
40000
4550000