Problem 13-5 A firm must plan production for the next six months. Each unit cost
ID: 374869 • Letter: P
Question
Problem 13-5 A firm must plan production for the next six months. Each unit costs $290 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 $140, and the cost to fire a worker is $280 per worker. Each worker produces 10 units per month. There are 18 persons on the payroll at the beginning of the first month. The company currently has 100 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 230 230 230 230 500 560 a. From the information given above, what level production rate will meet demand for the next six months? Using that rate, complete the level plan below. (Leave no cells blank -be certain to enter "" wherever required.) evel Plarn Regular Production Ending Invento Number of Workers Month Demand Fire 230 230 230 230 500 560 1,980 Total 0 0Explanation / Answer
Given Information : Unit costs = $250 Inventory holding cost = $10 per unit per month Cost to hire a worker = $100 Cost to fire a worker = $200 per worker. Capacity of a worker = 10 units per month.
Total Level Planning Cost:2100+100 – 100) /6 =2100 / 6 = 350.EIBIReg. production: 2,100 x $250 = $525,000Hire cost =15x $100 =$1,500I.C.C. =1,150 x $10=$11,500 --> 538000$
Reg production : 2100 x $250 = $525000Hire : 30 x $100 =$3,000Fire : 10 x $200 =$2000Icc: 600 x $10 =$6,000, Total cost-> $536000