Problem 1

Leather-All produces a line of handmade leather products. At the present time, the company is
producing only belts, handbags, and attaché cases. The predicted demand for these three types of items
over a six-month planning horizon is as follows:

Month # of working Belts Handbags Attache

Days cases
1 22 2500 1250 240
2 20 2800 680 380
3 19 2000 1625 110
4 24 3400 745 75
5 21 3000 835 126
6 17 1600 375 45

The belts require an average of two hours to produce, the handbags three hours, and the attaché cases
six hours. All the workers have the skill to work on any item. Leather-All has 46 employees who each has
a share in the firm and cannot be fired. There are an additional 30 locals that are available and can be
hired for short periods at higher cost. Regular employees earn $8.50 per hour on regular time and
$14.00 per hour on overtime. Regular time comprises a seven-hour workday, and the regular employees
will work as much overtime as is available. The additional workers are hired for $11.00 per hour and are
kept on the payroll for at least one full month. Costs of hiring and firing are negligible.

Because of the competitive nature of the industry, Leather-All does not want to incur any demand back
orders.

a. Using worker hours as an aggregate measure of production, convert the forecasted demands to
demands in terms of aggregate units.

b. What would be the size of the workforce needed to satisfy the demand for the coming six months on
regular time only? Would it be to the company’s advantage to bring the permanent workforce up to this
level? Why or why not?

c. Formulate the problem of optimizing Leather-All’s hiring schedule as a linear program. Define all
problem variables and include whatever constraints are necessary.

d. Solve the problem formulated in part (a) for the optimal solution. Round all the relevant variables and
determine the cost of the resulting plan.