Anik & Co. produces electric wires for state electricity department. Quality is not quite good as it could be at this point, but the selling price is low and Anik can study the market response while spending more time on R&D. At this stage, however Anik & co. needs to develop aggregate production plan for the next six months January through June. You have been commissioned to create the plan. The following information should help:

	January	February	March	April	May	June	Total
Demand forecast	500	600	650	800	900	800	4250
Number of working days	22	19	21	21	22	20	125

Costs

Materials $ 100/unit

Inventory holding cost $ 10/unit/month

Marginal cost of stockout $ 20/unit/month

Marginal cost of subcontracting $ 100/unit

Hiring & training cost $ 50/worker

Layoff cost $ 100/worker

Labour hours required 4/unit

Straight time cost (first eight hours each day) $12.5/hour

Overtime cost $ 18.75/hour

Inventory

Beginning inventory 200 units

Safety stock required 0% of the month required

What is the cost of each of the following production strategies?

(a) Level strategy (assuming a starting workforce of 10) (4 + 3.5 Marks)

(b) Subcontracting (Use 10 workforce)