The forecasted demand is 1500, 1600, 1300, 1100, for quarters 1,2,3,4, respectiv

Question

The forecasted demand is 1500, 1600, 1300, 1100, for quarters 1,2,3,4, respectively. The beginning and ending annual inventory is 600, no negative inventory is allowed, unit carrying cost is $2/item/quarter, hiring cost is $92/worker, firing cost is $84/worker, and the labor standard is 6.5 hours/unit.

Question 8. What is the minimum cost of the optimal production plan where the total annual cost consists of carrying, hiring, and firing?

(A) $1125 (B) $5900 (C) $2850 (D) $3300 (E) none of the above

Explanation / Answer

Total inventory for the year = 1500+1600+1300+1100 = 5500 units

Carrying cost = 5500 x $2 = $11000

Labour cost for 5500 unist = 5500 x 6.5 = 35750 hours

Number of workers required for a 8 hour man day = 4469

If we calculate all the costs that are involved none of them are coming to the options that are given. Hence it is option E none of the above.

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