A Firm's Demand in the Next Four Quarters (Its Aggregate

question 24

Multiple Choice

A firm's demand in the next four quarters (its aggregate planning horizon) is forecast to be 80, 50, 40, and 90 units. Last quarter, the firm produced 60 units. If it uses level scheduling, the firm will.

• A) hire workers to permit production of 65 units per quarter for the next four quarters
• B) hire 20 workers
• C) have an increase in inventory of 20 units in the next quarter
• D) have a decrease in inventory of 5 units in the next quarter
• E) change its workforce each quarter so that inventory does not change

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Definitions:

Inelastic Resource Supply

A condition where the supply of a resource does not significantly change in response to price changes.

Total Variable Costs

The sum of all costs that vary with the level of output or production, such as materials and labor, as opposed to fixed costs which remain constant regardless of the level of production.

Average Fixed Cost

The steady costs associated with production, irrespective of output volume, divided by the number of units produced.

Marginal Cost

The added cost faced when one additional unit of a product or service is produced.