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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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