Determine the cost of each strategy

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Reference no: EM131751672

A manufacturer of men’s wear needs help planning production for coming year. Demand for the clothing follows a seasonal pattern as shown in Table 2 below. Given the following costs and demand forecasts test these four strategies for meeting forecast demand: (a) level production with overtime and subcontracting, (b) level production with backorders as needed, (c) chase demand and (d) 3000 units in regular production from April through September and as much overtime, and subcontracting production in the other months as needed to meet annual demand. Determine the cost of each strategy. Which strategy would you recommend?

Table 2: Monthly demand forecasts

Month Demand forecast

January 1000

February 500

March 500

April 2000

May 3000

June 4000

July 5000

August 3000

September 1000

October 500

November 500

December 3000

Beginning workforce 8 workers

Subcontracting capacity unlimited

Overtime capacity 2000 units per month

Production rate per worker 250 units/month

Regular wage rate $ 15 per unit

Overtime wage rate $ 25 per unit

Subcontracting cost $ 30 per unit

Hiring cost $ 100 per worker

Firing cost $ 200 per worker

Inventory holding cost $ 0.50 per unit/month

Backordering cost $10 per unit/month

Reference no: EM131751672

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