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Question 1: The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand

Question: Question 1: The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next eight months as follows: Month Feb Mar Jul Aug Jan Apr May Jun Demand 1400 1600 1800 1800 2200 2200 1800 1400 Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stockout cost of lost salesShow transcribed image textTranscribed image text: Question 1: The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next eight months as follows: Month Feb Mar Jul Aug Jan Apr May Jun Demand 1400 1600 1800 1800 2200 2200 1800 1400 Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Production cost is $200 per unit. There is no overtime used. Part A) Plan A: Vary the workforce level to execute a chase strategy by producing the quantity demanded in the prior month. (This myopic forecasting rule worked well in weather forecasting.) The December demand and rate of production are both 1600 units per month. The cost of hiring additional workers is $5000 per 100 units. The cost of laying off workers is $7500 per 100 units. Evaluate this plan by computing the costs for January through August. Part B) Plan B: Produce a constant rate of 1400 per month, which will meet minimum demands. Then use subcontracting, with the additional units produced at a premium of $75 per unit. Evaluate this plan. Part C) Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average requirements and allow varying inventory levels. Evaluate this plan as well. Part D) Which plan would you recommend?

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