Jason Enterprises (JE) produces video telephones for the home market. Quality is not quite as good as it could be at this point, but the selling price is low and Jason can study market response while spending more time on R&D. At this stage, however, JE needs to develop an aggregate production plan for the six months from January through June. You have been commissioned to create the plan. The following information should help:

What is the cost of each of the following production strategies?

a. Produce exactly to meet demand; vary workforce (assuming opening workforce equal to first month's requirements).

b. Constant workforce; vary inventory and allow shortages only (assuming a starting workforce of 10).

c. Constant workforce of 10; use subcontracting.

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DEMAND AND WORKING DAYS JANUARY FEBRUARY MARCH APRIL MAY JUNE TOTALS Demand forecast 500 600 650 800 900 800 4.250 Number of working days 22 19 21 21 22 20 125 COSTS Materials Inventory holding cost Marginal cost of stockout $100.00/unit $10.00/unit/month $20,00/unit/month $100.00/unit ($200 subcontracting cost less $100 material savings) $50.00/worker Marginal cost of subcontracting Hiring and training cost Layoff cost Labor hours required Straight-time cost (first eight hours each day) Overtime cost (time and a half) Beginning inventory Safety stock required $100.00/worker 4/unit $12.50/hour $18.75/hour INVENTORY 200 units 0% of month demand