The forecast for a group of items manufactured in a firm is shown below.

Quarter 1 2 3 4 5 6 7 8 Demand 420 370 620 720 600 200 300 400 The firm estimates that it costs Z 225 per unit to increase the production rate, Z 275 per unit to decrease the production rate, Z 80 per unit per quarter to carry the items on inventory and Z 150 per unit if subcontracted.

Given these costs, evaluate the following mixed strategy. The company decides to maintain a constant production rate of 250 units per quarter and permit 20% overtime when the demand exceeds the production rate. The incremental cost of overtime is Z 25 per hour. It plans to meet the excess demand by hiring and firing of workers.

AppendixLO1