The president of Hill Enterprises, Terri Hill, projects the firm\'s aggregate de
ID: 367074 • Letter: T
Question
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April 1,500 1,500 1,800 1,800 May June July August 2,200 2,200 1,800 1,800 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $25 per unit per month. Ignore any idle-time costs. The plan is called plan A Plan A: Vary the workforce level to execute a strategy that produces the quantity demanded in the prior month. The December demand and rate of production are both 1,600 units per month. The cost of hiring additional workers is $55 per unit. The cost of laying off workers is $80 per unit. Evaluate this plan. (Enter all responses as whole numbers.) Note: Both hiring and layoff costs are incurred in the month of the change. For example, going from 1,600 in January to 1,500 in February incurs a cost of layoff for 100 units in February. Hire Units Layoff Units Ending Stockouts Period Month Demand Production nits 1,600 1,500 1,500 1,800 1,800 2,200 2,200 1,800 0 December 200 1,600 1,600 1,500 1,500 1,800 1,800 2,200 2,200 January 2 February 3 March 4 April 5 May 6 June 7 JulyExplanation / Answer
The plan A is as follows:
Period
Month
Demand
Production
Hire
Layoff
Ending Inventory
Stockouts
0
Dec
1600
200
1
Jan
1500
1600
0
200+100
= 300
2
Feb
1500
1500
100
300
3
Mar
1800
1500
0
300+(1500-1800)
= 0
4
Apr
1800
1800
300
0
5
May
2200
1800
0
0
(2200-1800)
= 400
6
Jun
2200
2200
400
0
400
7
Jul
1800
2200
0
-400+(2200-1800)
= 0
8
Aug
1800
1800
400
0
Total
700
500
800
800
Rate per unit
55
80
25
100
Total Cost
38500
40000
20000
80000
Hiring Cost
Layoff Cost
Inventory Cost
Stockout cost
Total Cost
178500
Hiring Cost = $38,500
Layoff Cost = $40,000
Inventory holding cost = $20,000
Stockout cost = $80,000
Total Cost = $178,500
Period
Month
Demand
Production
Hire
Layoff
Ending Inventory
Stockouts
0
Dec
1600
200
1
Jan
1500
1600
0
200+100
= 300
2
Feb
1500
1500
100
300
3
Mar
1800
1500
0
300+(1500-1800)
= 0
4
Apr
1800
1800
300
0
5
May
2200
1800
0
0
(2200-1800)
= 400
6
Jun
2200
2200
400
0
400
7
Jul
1800
2200
0
-400+(2200-1800)
= 0
8
Aug
1800
1800
400
0
Total
700
500
800
800
Rate per unit
55
80
25
100
Total Cost
38500
40000
20000
80000
Hiring Cost
Layoff Cost
Inventory Cost
Stockout cost
Total Cost
178500
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