Answer Happy

The following are firm's requirements for the next 8 months:
Period
Expected Demand
Jan
 1,400
Feb
 1,600
Mar
 1,800
Apr
 1,800
May
 2,200
Jun
 2,200
Jul
 1,800
Aug
 1,800
14,600
At the start of January there were 200 units in stock which cost
€20 per unit to hold. As the operations manager you are charged
with costing the following plan scenarios.
Plan A
Vary the workforce level to execute a strategy that produces the
quantity demanded. In December demand was 1,600 units. The cost of
hiring additional workers is €5,000 per hundred workers and the
cost of laying off workers is €7,500 per 100 workers. The cost of
holding inventory is €20 per unit and cost of lost sales is €100
per unit.

(5 marks)
Plan B
Develop a plan with a constant rate of 1,400 units per month.
Any additional units will have to be subcontracted at a premium
price of €75 per
unit.

(5 marks)
Plan C
Maintain a stable workforce which is equal to the average demand
requirements allow varying inventory levels.



(5 marks)
Plan D
Keep the current workforce table producing 1,600 units per
month. Overtime of up to 20% of the production rate is permitted
with an additional cost of €50 unit and the warehouse is now
constrained to a maximum inventory of 400
units.
(5 marks)