Evaluating plan using cost of laying off workers

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Reference no: EM1339631

Q1) Firm X projects the company's aggregate demand requirements over the next 8 months as shown in the table below. The operations manager is considering a new plan, which begins in January. Ignore any idle-time costs. We will call this Plan A. Plan A: Vary the workforce level to execute a "chase" strategy to produce only the quantity demanded each month. The December rate of production was 1,600 units per month. The cost of hiring additional workers is $5,000 per 100 units. The cost of laying off workers is $7,500 per 100 units. Evaluate this plan.

True or False

1. Because we have 200 units in beginning inventory, the demand to be met by production in January should be adjusted to only 1,200 units.

2. Firing costs in January are $30,000.

3. Hiring costs in February are $30,000.

4. Hiring costs in June are $20,000.

5. The total cost of hiring and laying off workers in this plan is $140,000.

Reference no: EM1339631

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