A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that:
A) the January requirement is below level production of 420 units.
B) level production is approximately 1000 units per day.
C) level production of 420 units per day is below the January requirement.
D) level production is approximately 420 units per month.
E) the firm must hire workers between December and January.

Question

Quizplus · Accepted Answer

To calculate level production, divide the total demand (105,000 units) by the number of production days (250):

Level production = 105,000 units / 250 days = 420 units per day

To determine if the January requirement is below level production, we need to multiply the level production (420 units per day) by the number of production days in January (22):

January level production = 420 units/day x 22 days = 9,240 units

Since the estimated demand for January is 11,000 units, the January requirement (11,000 units) is above the level production of 9,240 units. Therefore, the correct answer is C - level production of 420 units per day is below the January requirement.

A Firm Uses Graphical Techniques in Its Aggregate Planning Efforts