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Deb Bishop Health and Beauty Products has developed a new shampoo, and you need to develop its aggregate schedule. The cost accounting department has supplied you the costs relevant to the aggregate plan, and the marketing department has provided a four-quarter forecast. All are shown as follows:
QUARTER
FORECAST
1
1,400
2
1,200
3
1,500
4
1,300
COSTS
Previous quarter's output
1,500 units
Beginning inventory
0 units
Stockout cost for backorders
$50 per unit
Inventory holding cost
$10 per unit for every unit held at the end of the quarter
Hiring workers
$40 per unit
Layoff workers
$80 per unit
Unit cost
$30 per unit
Overtime
$15 extra per unit
Subcontracting
Not available
Your job is to develop an aggregate plan for the next four quarters.
a) First, try a chase plan by hiring and layoffs (to meet the forecast) as necessary.
b) Then try a plan that holds employment steady.
c) Which is the more economical plan for Deb Bishop Health and Beauty Products?
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