Question

A fabric mill has developed the following forecasts (in hundred bolts of cloth). The mill has a normal capacity of 275 units (a unit = hundred bolts) per month, and employs 275 workers. Regular labour cost is $ 2,000 per unit and overtime labour cost is $3,000 per unit. Up to 50 units per month can be made during overtime. The beginning inventory is zero. Hiring cost is $1,000 per worker and layoff cost is $500 per worker. The inventory holding cost is $1,000 per unit per month and backorder cost is $5,000 per unit per month. Develop a level output/workforce plan.

Answer 1

A level output/workforce plan involves maintaining a consistent level of production and workforce. To develop this plan, calculate the demand for each month and consider labor and overtime costs, hiring and layoff costs, inventory holding costs, and backorder costs.

Step-by-step explanation:

A level output/workforce plan involves maintaining a consistent level of production and workforce over some time. In this case, the fabric mill wants to develop a level output/workforce plan based on the given forecasts and capacity constraints.

First, let's calculate the demand for each month by subtracting the beginning inventory and regular capacity from the forecasts. We can then determine the number of units that need to be produced each month.

Next, we need to consider the labor and overtime costs. If the demand exceeds the regular capacity, we can use overtime to produce additional units. However, we need to keep in mind the overtime limit and the associated cost.

We also need to consider hiring and layoff costs, inventory holding costs, and backorder costs. By considering these factors, we can determine the optimal level of production and workforce for each month while minimizing costs and meeting the demand.