Montague Furniture Corporation is a fictional chair manufacturer located in Pampanga, Philippines. They make two types of rattan bamboo chairs€”Rocking Chair and Windsor Chair. Both chairs are manufactured in the same factory and require the same amount of equipment and labor resources. You also have the following additional data (in U.S. dollars):

Regular time production cost = $400 per chair.

Overtime production cost = $550 per chair.

Subcontracting cost = $25 per case.

Labor hours required to make each chair = 4.2 hours.

Labor hours available each month = 200 hours per worker.

Cost of hiring a worker = $300.

Cost of each worker layoff = $400.

Monthly carrying cost = $20 per chair.

The company begins the next planning horizon of 12 months with 30 workers and 0 chairs in inventory. The forecasted demand for both types of chairs is given in the following table:

1. Develop a level production plan for the 12-month planning period. Use overtime, subcontracting, and inventory to absorb demand variations.

2. Develop a chase production plan by hiring and laying off workers.

3. Which plan yields the lowest cost?

Transcribed Image Text:

Rocking Chair Month Windsor Chair January 700 1,220 February 730 1,550 March 745 1,700 2,070 April 690 2,250 May 540 June 420 2,400 July 870 1,700 770 August 1,310 September 910 1,890 October 1,640 830 November 400 890 December 780 1,460