A firm must plan production for the next six months. Each unit costs $320 to produce and it has an inventory holding cost of $18 per unit per month based on ending inventory levels. The cost to hire a

  

A firm must plan production for the next six months. Each unit costs $320 to produce and it has an inventory holding cost of $18 per unit per month based on ending inventory levels. The cost to hire a worker is $170, and the cost to fire a worker is $340 per worker. Each worker produces 10 units per month. There are 15 persons on the payroll at the beginning of the first month. The company currently has 125 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 1 2 3 4 5 6
Demand 260 260 260 260 470 650
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 “0” wherever required.)
Level Plan
Month Demand Regular Production Ending Inventory Number of Workers Hire Fire
1 260
2 260
3 260
4 260
5 470
6 650
Total 2,160 0 0 0 0

b-1. At that production rate, what is the maximum end-of-period inventory experienced at some time during the six months?
Maximum end-of-period inventory units=
b-2. What would be the cost of a level production plan?
Total Cost=

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c-1. From the information given above, Develop a chase (Hire and Fire only) Production Plan? (Leave no cells blank – be certain to enter “0” wherever required.)
Month Demand Regular Production Ending Inventory Number of Workers Hire Fire
1 260
2 260
3 260
4 260
5 470
6 650
Total 2,160 0 0 0 0

c-2. What is the total cost of a chase (hire and fire only) production plan?
Total cost=

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