Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters. Quarter Demand Previous quarter's output 1500 units 1 1300 Beginning inventory 200 units 2 1400 Stock-out cost $50 per unit 3 1500 Inventory holding cost $10 per unit at end of quarter 4 1300 Hiring workers $4 per unit Laying off workers $8 per unit Unit cost $30 per unit Overtime $10 extra per unit What is the cost of the following plans: a. Plan A-chase demand by hiring and layoffs. Cost = $ b. Plan B-produce at a constant rate of 1200 and obtain the remainder from overtime. Cost = c. What plan would you choose?

Question

Mia Doyle

Business

1 January, 19:06

Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters. Quarter Demand Previous quarter's output 1500 units 1 1300 Beginning inventory 200 units 2 1400 Stock-out cost $50 per unit 3 1500 Inventory holding cost $10 per unit at end of quarter 4 1300 Hiring workers $4 per unit Laying off workers $8 per unit Unit cost $30 per unit Overtime $10 extra per unit What is the cost of the following plans: a. Plan A-chase demand by hiring and layoffs. Cost = $ b. Plan B-produce at a constant rate of 1200 and obtain the remainder from overtime. Cost = c. What plan would you choose?

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Answers (1)

Know the Answer?

Zander Hess · Answer 1

Plan A - chase demand by hiring and layoffs will be chosen.

Explanation:

Since this is a chase plan, there is no scope of the stockout and the overtime is also not planned. the following is used to choose the plan.

Qty Demand Production Hire Fire Ending inventory

1500 200

1 1400 1200 0 300 0

2 1200 1200 0 0 0

3 1500 1500 300 0 0

4 1300 1300 0 200 0

Total 5200 300 500 0

Marginal cost $30 $4 $8 $10

Cost $156,000 $1,200 $4,000 $0

$161,200