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The following forecast constitutes the demand for relay switches. John Smith, the production planner, has assembled the following cost data and the quarterly demand forecast:
The following forecast constitutes the demand for relay switches. John Smith, the production planner, has assembled the following cost data and the quarterly demand forecast: Quarter Forecast 1 1800 2 1100 3 1600 4 900 Costs/Other Data Previous quarter's output = 1300 cases Beginning inventory = 350 cases Stock-out cost = $110 per case Inventory holding cost = $30 per case at the end of quarter Hiring employees = $40 per case Terminating employees = $75 per case Subcontracting cost = $60 per case Unit cost on regular time = $30 per case Overtime cost = $20 extra per case John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: Plan A: a strategy that hires and fires personnel to have monthly production meet the forecast. Plan B: a level strategy, producing the average forecast by regular time production each month. Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and subcontracting
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