Evaluate the plan on incremental cost basis

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Reference no: EM131129023

The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming stockout costs for lost sales of $100 per unit, inventory carrying costs of $30 per unit per month, and zero beginning and ending inventory, evaluate the following plan on an incremental cost basis: Plan B: Vary the workforce to produce the prior month's demand. The firm produced 1,300 unit in June. The cost of hiring additional workers is $30 per unit produced. The cost of layoffs is $65 per unit cut back. (Enter all responses as a whole numbers.) Note: Both hiring and layoff costs are incurred in the month of the change (i.e. going from production of 1,300 in July to 1,000 in August requires a layoff ( and related costs) of 300 units in August).

Month Demand Production Hire Layoff End Inventory Stockout

July 1000

August 1200

September 1400

October 1800

November 1800

December 1800

Reference no: EM131129023

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