The ABC Company has recognized the following demand for the next four quarters:

ABC has traditionally used the hiring and firing of workers to accommodate the changes in demand for their products, but is considering maintaining a stable workforce and subcontracting production when demand exceeds the capability of the workforce. They currently have 30 workers, each capable of producing 100 units per quarter. It costs them $3,000 to hire a worker and $5,000 to fire a worker.

If they subcontract the work, it will cost them $30 per unit above their normal production cost. Given this information, should they continue their current practice or move to subcontracting the production over what their current workforce can produce?

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Quarter 1234 Demand 3,000 units 4,000 units 4,500 units 3,500 units