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A manager faces peak (weekly) demand for one of her operations, but is not sure how long the peak will last. She can either use overtime from the current workforce, or hire/lay off and just pay regular-time wages. Regular-time pay is $500 per week, overtime is $750 per week, the hiring cost is $2,000, and the layoff cost is $3,000. Assuming that people are available seeking such a short-term arrangement, how many weeks must the surge in demand last to justify a temporary hire? Hint: Use break-even analysis (see Supplement A, "Decision Making"). Let w be the number of weeks of the high demand (rather than using Q for the break-even quantity). What is the fixed cost for the regular-time option? Overtime option?
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