Problem 1 Based on past experience, a given company is estimating that demand over the next six periods will be as follow: Month Forecast July 1250 August 1150 1500 September October 1010 November December 1800 1300
Although the company estimated that they will end with 400 units, the actual inventory on hand at the end of June was 350 units. The company doesn’t want to maintain a minimum target inventory. Due to challenges with recruiting process, they want to minimize labor and capacity costs. The rate to maintain inventory at end of each period per month is a holding cost of $1.5 per unit, and the company would like to have 600 units on hand at the end of December. Each unit requires five employee hours to produce, there are 22 working days each month and each employee works eight hours per day. Each employee produces 35.2 units per month. The work force at the end of June was 35 employees. On average, each employee is paid $2,800 per month. Based on the effort of interviewing and training new employees, the company estimates that it costs $2,000 for each employee hired. Firing pays amounts to $2,000 per employee.
Determine a level production plan that minimizes arbitrary hiring and firing costs. Determine planned production, number of employees needed, hires or fires per period.
Evaluate the costs (inventory holding, wages, hiring, firing) that will be incurred per period based on the information given from the company.
What is the aggregate total cost for the six-period production plan?
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