Eagle Fabrication Has the Following Aggregate Demand Requirements and Other

question 102

Essay

Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters.
$$\begin{array} { | l | l | l | l | } \hline \text { Quarter } & \text { Demand } & \text { Previous quarter's output } & 1500 \text { units } \\\hline 1 & 1300 & \text { Beginning inventory } & 200 \text { units } \\\hline 2& 1400 & \text { Stockout cost } & \$ 50 \text { per unit } \\\hline 3 & 1500 & \text { Inventory holding cost } & \$ 10 \text { per unit at end of quarter } \\\hline 4 & 1300 & \text { Hiring workers } & \$ 4 \text { per unit } \\\hline & & \text { Laying off workers } & \$ 8 \text { per unit } \\\hline & & \text { Unit cost } & \$ 30 \text { per unit } \\\hline & & \text { Overtime } & \$ 10 \text { extra per unit } \\\hline\end{array}$$ Which of the following production plans is better: Plan A-chase demand by hiring and layoffs; or Plan B-produce at a constant rate of 1200 and obtain the remainder from overtime?

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