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Eagle Fabrication Has the Following Aggregate Demand Requirements and Other

Question 110

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Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters.
 Quarter  Demand  Previous quarter’s output 1500 units 11300 Beginning inventory 200 units 21400 Stockout cost $50 per unit 31500 Inventory holding cost $10 per unit at end of quarter 41300 Hiring workers $4 per unit  Laying off workers $8 per unit  Unit cost $30 per unit  Overtime $10 extra per unit \begin{array} { | l | l | l | l | } \hline \text { Quarter } & \text { Demand } & \text { Previous quarter's output } & 1500 \text { units } \\\hline 1 & 1300 & \text { Beginning inventory } & 200 \text { units } \\\hline 2& 1400 & \text { Stockout cost } & \$ 50 \text { per unit } \\\hline 3 & 1500 & \text { Inventory holding cost } & \$ 10 \text { per unit at end of quarter } \\\hline 4 & 1300 & \text { Hiring workers } & \$ 4 \text { per unit } \\\hline & & \text { Laying off workers } & \$ 8 \text { per unit } \\\hline & & \text { Unit cost } & \$ 30 \text { per unit } \\\hline & & \text { Overtime } & \$ 10 \text { extra per unit } \\\hline\end{array} Which of the following production plans is better: Plan A-chase demand by hiring and layoffs; or Plan B-produce at a constant rate of 1200 and obtain the remainder from overtime?

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Plan A would cost $165,400, while Plan B...

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