5. [20 points] The Westerbeck Company manufactures several models of automatic washers and dryers. The projected requirements over the next year for their washers follow. Month Jan Feb Mar Apr Demand 950 1050 870 1090 May Jun Jul Aug Sep Oct Nov Dec 1200 1350 1250 1100 980 950 890 810 Current inventory is 100 units. Current maximum capacity is 1200 units per month. The average salary of production workers is $1,300 per month. Material costs $120/unit. Each production worker accounts for 30 units per month. Overtime is paid at time and a half. Any increase or decrease in the production rate costs $50/unit for tooling, setup, and line changes. This does not apply, however, to overtime. Inventory-holding costs are $25 per unit per month. Lost sales are valued at $75 per unit. a. If the production choses to follow a level strategy, what should be the production level? What is the cost of level production strategy (exclude production cost)? Assume that in the level strategy, production level cannot be changed and any demand that cannot be satisfied with existing inventory will be considered as lost sales. Also, assume that the production level needs to be a multiple of 10. (e.g. Production level can be 990, but cannot be 995 or 1002). b. If the production choses to follow a chase strategy, what is the production level for each month? What is the cost of chase production strategy (exclude production cost)? Assume that the normal production rate is 1200 and if the production rate exceeds the normal rate, overtime should be paid. Also, each time the production rate changes, a rate change cost is applied. (e.g., if the actual production level is 1300 units, the rate change cost for that month = |normal-actual | x unit rate change cost = | 1200-1300 | x50 = $5000. c. Compare the production cost of level and chase strategies. Which strategy is better? Why?