Determine the cost of each strategy. Which strategy would you recommend?

| October 3, 2018

Rowley Apparel, manufacturer of the famous “Race-A-Rama” swimwear line, needs help planning production for next year. Demand for swimwear follows a seasonal pattern, as shown here. Given the following costs and demand forecasts, test these four strategies for meeting demand: (a) level production with overtime and subcontracting, as needed, (b) level production with backorders as needed, (c) chase demand, and (d) 3000 units regular production from April through September and as much regular, overtime, and subcontracting production in the other months as needed to meet annual demand. Determine the cost of each strategy. Which strategy would you recommend?MonthDemand ForecastJanuary1000February500March500April2000May3000June4000July5000August3000September1000October500November500December3000Beginning workforce8 workersSubcontracting capacityunlimitedOvertime capacity2000 units/monthProduction rate per worker250 units/monthRegular wage rate$15 per unitOvertime wage rate$25 per unitSubcontracting cost$30 per unitHiring cost$100 per workerFiring cost$200 per workerHolding cost$0.50 per unit/monthBackordering cost$10 per unit/month

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