Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Demand 3500 1000 600 1600 1000 800 1000 1000 4000 6500 6000 4000

a. Level production (constant workforce) with overtime and subcontracting

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Beginning inventory 0 0 1500 3400 4300 5800 7500 9000 10500 9000 5000 1500
Demand forecast 3500 1000 600 1600 1000 800 1000 1000 4000 6500 6000 4000
Average production 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500
Ending inventory -1000 1500 3400 4300 5800 7500 9000 10500 9000 5000 1500 0
OT 1000 0 0 0 0 0 0 0 0 0 0 0 1250 OT capacity
Subcontract 0 0 0 0 0 0 0 0 0 0 0 0
Regular cost $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 100.000 $ 1.200.000
Holding cost $ - $ 46.500 $ 105.400 $ 133.300 $ 179.800 $ 232.500 $ 279.000 $ 325.500 $ 279.000 $ 155.000 $ 46.500 $ - $ 1.782.500
OT cost $ 60.000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 60.000
Subcontracting cost $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total $ 3.042.500

b. Chase demand (no overtime, no subcontracting)

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Demand forecast 3500 1000 600 1600 1000 800 1000 1000 4000 6500 6000 4000
Production requirement 3500 1000 600 1600 1000 800 1000 1000 4000 6500 6000 4000
Workers needed 35 10 6 16 10 8 10 10 40 65 60 40
Workers hired 10 0 0 10 0 0 2 0 30 25 0 0
Workers laid off 0 25 4 0 6 2 0 0 0 0 5 20
Hiring cost $ 20.000 $ - $ - $ 20.000 $ - $ - $ 4.000 $ - $ 60.000 $ 50.000 $ - $ - $ 154.000
Firing cost $ - $ 75.000 $ 12.000 $ - $ 18.000 $ 6.000 $ - $ - $ - $ - $ 15.000 $ 60.000 $ 186.000
Regular cost $ 140.000 $ 40.000 $ 24.000 $ 64.000 $ 40.000 $ 32.000 $ 40.000 $ 40.000 $ 160.000 $ 260.000 $ 240.000 $ 160.000 $ 1.240.000
Total $ 1.580.000

c. Steady workforce of 20 workers, overtime and subcontracting

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Beginning inventory 0 0 1000 2400 2800 3800 5000 6000 7000 5000 500 0
Demand forecast 3500 1000 600 1600 1000 800 1000 1000 4000 6500 6000 4000
Average production 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Ending inventory -1500 1000 2400 2800 3800 5000 6000 7000 5000 500 -3500 -2000
OT 1000 0 0 0 0 0 0 0 0 0 1000 1000 1000 OT capacity
Subcontract 500 0 0 0 0 0 0 0 0 0 2500 1000
Regular cost $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 80.000 $ 960.000
Holding cost $ - $ 31.000 $ 74.400 $ 86.800 $ 117.800 $ 155.000 $ 186.000 $ 217.000 $ 155.000 $ 15.500 $ - $ - $ 1.038.500
OT cost $ 60.000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 60.000 $ 60.000 $ 180.000
Subcontracting cost $ 35.000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 175.000 $ 70.000 $ 280.000
Total $ 2.458.500
Inventory holding cost $31 per unit per month
Hiring cost $2.000 per worker
Layoff (firing) cost $3.000 per worker
Regular production cost $40 per unit
Overtime cost $60 per unit
Cost of subcontracting $70 per unit
(Beginning) No. of regular workers 25 Workers
Regular production rate 100 Units per worker per month
Beginning Inventory Units
0
Ending Inventory
Overtime capacity 50% Regular production rate
Subcontracting capacity unlimited Units