Making production plan for the next year

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Reference no: EM132098042

The ABC Company is making a production plan for the next year, given the sales forecast for the next year as:

Quarter 1 2 3 4 Total Sales Forecast (units) 20,000 16,000 26,000 19,000 81,000

Currently, the ?rm has 18 employees, each producing up to 1,000 units per quarter and earning $2,000 per quarter. The ?rm estimates its inventory carrying cost to be $2 per unit of ending inventory per quarter and its hiring or layoff costs to be $1,600 per employee. The company currently has an inventory of 2,000 units and wishes to have an ending inventory of 1,000 units at the end of the next year (i.e., quarter 4 only). The company does not plan to incur inventory shortages. a) Using a chase strategy, determine a workforce level in each quarter and the total cost of the next year (labor cost, hiring cost, layoff costs, and inventory carrying cost). b) Using a level strategy, determine a constant workforce level and the total cost of the next year. c) Compare the production plans obtained in parts a) - b). Which production plan would you recommend, and why? d) (Bonus question) Using Excel Solver, determine the optimal plan and the total cost of the next year.

Reference no: EM132098042

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