3. Jason Enterprises (JE) is producing video
telephones for the home market. Quality is not quite as good as it
could be at this point, but the selling price is low and Jason can
study market response while spending more time on R&D.
At this stage, however, JE needs to develop an aggregate production plan for the six months from January through June. As you can guess, you have been commissioned to create the plan. Assume a starting workforce of 10. The following information should help you:
January February March April May June
Beginning inventory 200
Forecast demand 500 600 650 800 900 800
Holding cost $10/unit/month
Hiring cost/worker $50
Layoff cost/worker $100
Labor cost/hour-straight time $12.50
Labor cost/hour-overtime $18.75
Labor hours/unit 4
Daily labor hours 8
Current workforce 10
What is the cost of each of the following production strategies?
a. PLAN 1: Exact production; vary workforce.
b. PLAN 2: Constant workforce; vary inventory only. No stock outs are allowed.
c. Which plan is better? Why?