A firm completes its near level production, five-month demand plan for the next business planning cycle:
Month 1 Month 2 Month 3 Month 4 Month 5
Demand Forecast 15,000 20,000 25,000 25,000 18,000
Production Plan (Regular Time) 20,000 20,000 20,000 20,000 18,000
Production Plan (Overtime) 5,000
Ending Inventory 5,000 5,000
Average Inventory 2,500 5,000 2,500
Workforce Planning Starting Workforce Month 1 Month 2 Month 3 Month 4 Month 5
Hires 7
Layoffs 2
Actual Workforce Size 13 20 20 20 20 18
Regular Time Hours Required 2,000 2,000 2,000 2,000 1,800
Overtime Hours Required 500
Costs
Regular time cost per unit $15
Overtime cost per unit S25
Monthly inventory cost per unit $1
Cost of hire $1,500
Cost of layoff S400
What is the cost of this demand plan?
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Correct Answer:
C
The total cost is calculated by summing the costs of regular and overtime production, hiring, layoffs, and inventory. Calculations consider each month's figures and associated costs, providing a comprehensive total that aligns with supply chain cost management principles.
