Month. Sales forecast for Gauge sets
Jan 2018. 3440
Feb. 3560
March. 3360
April. 2600
May. 3720
June. 3960
July. 3320
August. 3240
Maunufactiring cost per gauge set: $17.50
Overtime manufacturing cost per gauge set: $31.00
Holding cost: $6 per gauge set per month
Average labor hours required per gauge set: 4 hours
Labor hours available per employee per month: 160
Cost to hire and train a new employee: $425
Cost to lay off an employee: $865
Beginning workforce is 85 workers (Regular production capacity)
Beginning inventory is 300 gauge sets
Ending inventory for August must be at least 300 gauge sets (Inventory in other months doesn’t matter)
Question:
1. What is the total cost for Regular and Overtime production?
2. What is the total cost of Hiring and Firing?
3. What is the total cost of holding ending inventory for the entire planning period?