Please show work A company has the following forecast demand for the next six mo
ID: 444983 • Letter: P
Question
Please show work
A company has the following forecast demand for the next six months:
Month
1
2
3
4
5
6
Demand
300
300
400
500
300
400
Now suppose that inventory, stockouts, overtime, and subcontracting are not allowed. Only hiring and layoff are allowed to respond to fluctuations in demand. Currently there are 20 workers on the payroll. The following information is also available.
Workdays/month
=
20
Labor hours/unit
=
16
Working time/day
=
8
Hiring cost/worker
=
$50
Layoff cost/worker
=
$100
The total cost of hiring and layoff during the six-month period will be:
A. $1,000
B. $2,000
C. $3,000
D. $4,000
E. $5,000
Month
1
2
3
4
5
6
Demand
300
300
400
500
300
400
Explanation / Answer
Labors required for the first month = 300 x 16 / 160 = 30
Labors in hand = 20
Hiring cost for the first month = 10 x 50 = $500
There would be no hiring or layoff in the second month as we have the adequate labors for the demand.
Labors required for the third month = 400 x 16 / 160 = 40
Labors in hand = 30
Hiring cost for the third month = 10 x 50 = $500
Labors required for the fourth month = 500 x 16 / 160 = 50
Labors in hand = 40
Hiring cost for the fourth month = 10 x 50 = $500
Labors required for the fifth month = 30
Labors in hand = 50
Layoff cost for the fifth month = 20 x 100 = $2000
Labors required for the last month = 40
Labors in hand = 30
Hiring cost for the last month = 10 x 50 = $500
Total hiring and layoff cost = 500 + 500 + 500 + 2000 + 500 = $4000