Deb Bishop Health and Beauty Products has developed a new shampoo, and you need to develop its aggregate schedule. The cost accounting department has supplied you the costs relevant to the aggregate plan, and the marketing department has provided a four-quarter forecast. All are shown as follows:
· Previous quarter output = 1,500 units
· Beginning inventory = 0 units
· Stock out cost = $50 per unit
· Inventory holding cost = $10 per unit for every unit held at the end of the quarter
· Hiring workers = $ 40 per unit
· Layoff workers= $80 per unit
· Unit cost = $30 per unit
· Overtime = $ 15 extra per unit
· Subcontracting = not available
Your job is to develop an aggregate plan for the next four quarters.
a) First, try a chase plan by hiring and layoffs (to meet the forecast) as necessary.
Then try a plan that holds employment steady.
c) Which is the more economical plan for Deb Bishop Health and Beauty Products?