4. The current aggregate demand requirements for a firm are shown below for the
ID: 344575 • Letter: 4
Question
4. The current aggregate demand requirements for a firm are shown below for the next six months: MonthMayJune JulyAugSept Oct Demand120 100 100 100130 150 The firm always plans to meet all demand. The firm currently has 120 workers capable of producing 120 units in a month (1 unit/worker). The workforce can be increased per worker). Inventory holding cost is S100 per unit per month. The firm currently has 40 units of inventory on hand, and it would like to have 40 units available at the end of each month. Regular production cost is $3,000 per unit. a. What should the aggn b. What is the cost of this plan? at a cost of S500 per worker) or decreased (at a cost of $1,000 holding cost is to be minimized?Explanation / Answer
Level production plan:
production in every month is equal.
here since 20000 total production required, 5000 per month production is done.
currently 10 workers with capacity of 100 can produce = 1000 units
for 5000 units we need = 50 workers
hence hire 40 at start. then the production is done as shown in table above. the inventory is also shown above.
cost:
production = 300*20000 = 6000000
inventory = (1000+2000+3000)*50 = 300000
hiring cost = 1000*40 = 40000
no firing cost
total cost = 6000000 + 300000 + 40000 = 6340000
Change plan:
here production is varied according to demand, the production is varied by hiring and firing of employees as required, the plan is shown above in table.
cost:
production = 300*20000 = 6000000
no inventory cost
hiring cost = (30+20+40)*1000 = 90000
firing cost = 30*2000 = 60000
total cost = 6000000 + 90000 + 60000 = 6150000
Level Month Demand Regular production Ending inventory Workers required Hire Fire 1 4000 5000 1000 50 40 0 2 6000 5000 0 50 3 3000 5000 2000 50 4 7000 5000 0 50 Total 20000 20000 3000 50Related Questions
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