2. The Three River Manufacturing Company forecasts monthly demand for its product for the next year as 418, 414, 395, 381, 372, 359, 386, 398, 409, 417, 421, 425.

On average there are 22 production days in a month. The work content for one unit of the product is 3 worker-days. The current production work force level is 50 employees.

The cost of hiring an employee is $500, and the cost of firing an employee is

$450. Regular-time pay for the employees is $1,250 per month. The cost to hold a unit in inventory for a month is $4. The current level of inventory is 800 units. As protection against unforeseeable demand fluctuations, the ending inventory for each month is planned at no less than 800 units. However, exception to the ending inventory rule is permitted as long as it does not fall below 800 units for more than three periods in the year and the average annual inventory is at least 800. Set up a worksheet for this aggregate planning problem, and consider the following:

a. Develop a production plan, following each of the three strategies: chase, level, and mixed.

b. What is the cost for each production plan?

c. For each plan develop a graph of cumulative demand and cumulative production, and show the accumulation and depletion of inventory.