Describe optimal hiring-layoff plan and corresponding costs

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Reference no: EM132224413

This is a linear programming problem:

During the next four months, BBB Company must meet (on time) the following demand for its main

product: 300 in month 1; 500 in month 2; 100 in month 3; and 100 in month 4. At the beginning of month 1, 50 units of the product are on hand, and BBB has three workers. A worker is paid $2,000 per month. Each worker can work up to 160 hours a month before he or she receives overtime. A worker may be forced to work up to 20 hours of overtime per month and is paid

$25 per hour for overtime labor. It takes four hours of labor and $5 of raw material to produce one unit of the product. At the beginning of each month, workers can be hired or fired. Each hired worker cost $2,500, and each fired worker costs $3,000. (This is in addition to the $2,000 monthly pay to the worker.) At the end of each month, a holding cost of $30 per unit of the product left in inventory is incurred. Production in a given month can be used to meet that month’s demand. BBB wants to use LP to determine its optimal production schedule and labor policy.

a. Formulate the problem as a spreadsheet model and solve it optimally.

b. Describe the optimal hiring/layoff plan and corresponding costs each month.

c. Describe how many workers and how many hours each worker works in each month. Also show the wages paid each month.

d. Describe the ending inventory status each month.

Reference no: EM132224413

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