Assignment:
The fabrication department of a furniture house is preparing aggregate plans for the next nine months. The forecast for demand is also obtained and tabulated as under:
| Period |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Total |
| Forecast |
360 |
440 |
500 |
540 |
400 |
320 |
300 |
500 |
340 |
3700 |
The department strength is 30 full time employees, who are capable to produce 15units of output per period at a cost of $8 per unit. Inventory carrying cost is $6 per unit per period and backlog cost is $12 per unit per period. The HR department has submitted a proposal of hiring 3 persons to start working in period 1, one on temporary basis who will work only through period 5. This would cost $800 in addition to unit production cost.
- What is the rational for this plan?
- Determine the total cost of the plan, including production inventory and back-order costs.
Provide complete and step by step solution for the question and show calculations and use formulas.