Question

Which basic production planning strategy avoids hiring and layoff costs and the costs of excess capacity?

A) demand matching
B) operation smoothing
C) subcontracting
D) all of the above
E) none of the above

Answer 1

Operation smoothing is the production planning strategy that avoids the costs of hiring, layoffs, and excess capacity by maintaining steady output and workforce levels.

Step-by-step explanation:

The basic production planning strategy that avoids hiring and layoff costs as well as the costs of excess capacity is operation smoothing (B). Operation smoothing involves maintaining a steady rate of output and workforce levels while using inventory to absorb fluctuations in demand. This strategy allows for a more stable production process and can help in avoiding the costs associated with changing production levels frequently.

In contrast, demand matching would involve adjusting production rates to meet demand, which can incur hiring and layoff costs, and subcontracting involves hiring other companies to handle excess demand, which may also carry additional costs. Therefore, the correct answer is B) operation smoothing.