Eagle Fabrication Has the Following Aggregate Demand Requirements and Other

question 126

Essay

Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters.
$\begin{array}{|l|l|l|l|}\hline\text { Quarter}&\text { Demand }& \text { Previous quarter's output } &1500 \text { units }\\\hline1&1300& \text { Beginning inventory } & 200 \text { units } \\\hline2&1400& \text { Stockout cost } & \$ 50 \text { per unit } \\\hline&&&\$ 10 \text { per unit at end of } \\3&1500& \text { Inventory holding cost } &\text { quarter }\\\hline 4&1300&\text { Hiring workers } & \$ 4 \text { per unit } \\\hline &&\text { Laying off workers } & \$ 8 \text { per unit } \\\hline&& \text { Unit cost } & \$ 30 \text { per unit } \\\hline &&\text { Overtime } & \$ 10 \text { extra per unit }\\\hline\end{array}$
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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Definitions:

Interest Calculation

The process of determining the amount of interest owed or earned over a specific period, based on the principal amount and the rate of interest.

Notes Receivable

Written promissory notes indicating the amounts due to be paid to the holder, recognized as assets on a company's balance sheet.

Maturity Value

The total amount payable to an investor at the end of a bond's term or the final payment due on a loan, including principal and any accrued interest.

Trade Receivables

Amounts owed to a company by its customers as a result of delivering goods or services on credit.