A company produces to a seasonal demand, with the forecast for the next 12 months as given below. The current labor force can produce 500 units per month. Each employee can produce 20 units per month and is paid $2,000 per month. The inventory-carrying cost is $50 per unit per year. Changes in the production level cost $100 per unit due to hiring or layoffs, line changeover costs, and so forth. Assume 200 units of initial inventory.

a. What is the cost of carrying inventory for the month of January for the level strategy?

b. What is the total cost of the level strategy including regular time, inventory carrying cost and changes in production level?

c. What is the total cost of the chase strategy?

 

Month JFMAM J JA S ON D Demand 651 70o0 850 702 650 500 600 850 803 900 703 600