Mama’s Stuffin’ is a popular food item during the fall and winter months, but it is marginal in the spring and summer. Use the following demand forecasts and costs to determine which of the following production planning strategies is best for Mama’s Stuffin’:
a. Level production over the 12 months.
b. Produce to meet demand each month. Absorb variations in demand by changing the size of the workforce.
c. Keep the workforce at its current level. Supplement with overtime and subcontracting as necessary.
Month Demand Forecast
March ............. 2000
April ............. 1000
May ............. 1000
June ............. 1000
July ............. 1000
August ............ 1500
September .......... 2500
October ............ 3000
November .......... 9000
December .......... 7000
January ............ 4000
February ........... 3000
Overtime capacity per month ........ Regular production
Subcontracting capacity per month .... Unlimited
Regular production cost ......... $30 per pallet
Overtime production cost......... $40 per pallet
Subcontracting cost .......... $50 per pallet
Holding cost .............. $2 per pallet
Beginning workforce .......... 10 workers
Production rate ............. 200 pallets per worker per month
Hiring cost ............. $5000 per worker
Firing cost ............. $8000 per worker