The Operations Manager of XYZ, Inc. needs to prepare an aggregate production plan for the next year to meet the demand forecast at minimum cost. Demand for the next four quarters is shown below:

Quarterly demand forecast

1 22,000

2 27,000

3 29,000
4 20,000

Assume that at the beginning of the planning period (i.e., quarter 1) there were 40 production workers and 1,500 units in inventory. Each worker produces 500 units per quarter and is paid $11,000 per quarter. If used, overtime is paid at 150% of regular wages. It costs $3,500 on average to fire a worker and $1,700 to hire a new worker. The quarterly inventory holding cost averages $30 per unit. At the end of the fourth quarter, the manager plans to have 5,500 units of inventory on hand.

Instructions:

Suppose the operations manager was using the tiering strategy in the past. She wonders if using the chase strategy will provide a more profitable option. To help her make an informed decision, she has asked you to develop an alternative production plan for next year using the chase strategy. Assume that she has already determined, based on her past experience, that the total cost of using the tiering strategy will be approximately $2,683,000. To minimize the total, would she recommend using the chase strategy to develop a production plan for next year? Explain. [You can use the following table to facilitate your calculations.]

Suppose the manager also wonders how many workers will be needed if company XYZ uses a mixed strategy that combines leveling with overtime. Determine the number of workers that will be required if a mixed level strategy plus 20% overtime is used during the two peak quarters.

Use the table provided on the next page to answer part (a)--Level and Pursuit Strategy:

Resources	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Number of workers
Initial inventory
Production
Demand
Finishing inventory
Costs
Typical labor cost
Cost of overtime, if any.
Hiring/Firing Cost
Inventory Holding Cost
Other expenses, if any
Total cost