A firm must plan production for the next six months. Each unit costs $340 to pro

Question

A firm must plan production for the next six months. Each unit costs $340 to produce and it has an inventory holding cost of $20 per unit per month based on ending inventory levels. The cost to hire a worker is $190, and the cost to fire a worker is $380 per worker. Each worker produces 10 units per month. There are 17 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 280 280 280 280 500 660 b-2. What would be the cost of a level production plan? Total cost c-1. From the information given above, Develop a chase (Hire and Fire only) Production Plan? (Leave no cells blank be certain to enter "o" wherever required.) Regular Production Fire Hire Fire Month Demand Production lnvenitgnNmberot Inven Workers 280 280 280 280 2 4 6 Total 2,280 c-2. What is the total cost of a chase (hire and fire only) production plan? cost

Explanation / Answer

B2- 7,52,180

Month

Demand

Level Production required

worker Req

Production

Cost of production

Hiring of extra worker

Hiring cost

Firing of extra worker

Firing Cost

End of period Inventory

Inventory holding cost

Opening Inventory

125

Total Demand of period/number of periods

Level production/10

Workers * 10

Production * 340

Number of workers reqruied for period-17 (present strenght of workers)

Extra worker*190

Extra worker*380

Production- demand

End of period inventory *20

Total Cost

1

280

363

37

370

                     1,25,800

20

3800

0

0

90

1800

1,31,400.00

2

280

363

37

370

                     1,25,800

0

0

0

0

90

1800

1,27,600.00

3

280

363

36

360

                     1,22,400

0

0

1

380

80

1600

1,24,380.00

4

280

363

36

360

                     1,22,400

0

0

0

0

80

1600

1,24,000.00

5

500

363

36

360

                     1,22,400

0

0

0

0

0

0

1,22,400.00

6

560

365

36

360

                     1,22,400

0

0

0

0

0

0

1,22,400.00

Closing Inventory

125

125

2500

       2,500.00

Total

2180

2180

2180

741200

3800

380

6800

7,52,180.00

Month

Demand

Level Production required

worker Req

Production

Cost of production

Hiring of extra worker

Hiring cost

Firing of extra worker

Firing Cost

End of period Inventory

Inventory holding cost

Opening Inventory

125

Total Demand of period/number of periods

Level production/10

Workers * 10

Production * 340

Number of workers reqruied for period-17 (present strenght of workers)

Extra worker*190

Extra worker*380

Production- demand

End of period inventory *20

Total Cost

1

280

363

37

370

                     1,25,800

20

3800

0

0

90

1800

1,31,400.00

2

280

363

37

370

                     1,25,800

0

0

0

0

90

1800

1,27,600.00

3

280

363

36

360

                     1,22,400

0

0

1

380

80

1600

1,24,380.00

4

280

363

36

360

                     1,22,400

0

0

0

0

80

1600

1,24,000.00

5

500

363

36

360

                     1,22,400

0

0

0

0

0

0

1,22,400.00

6

560

365

36

360

                     1,22,400

0

0

0

0

0

0

1,22,400.00

Closing Inventory

125

125

2500

       2,500.00

Total

2180

2180

2180

741200

3800

380

6800

7,52,180.00

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