A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. In following the chase strategy, the firm will
A) add 100 units to inventory in the next period
B) add 200 units to inventory in the next period
C) hire workers to match the 100 unit difference
D) lay off workers to match the 200 unit difference
E) implement a lower price point to increase demand

Question

Quizplus · Accepted Answer

The pure chase strategy involves adjusting workforce levels to exactly match demand. Since demand is dropping from 1000 units to 800 units, the firm will reduce its workforce to decrease production by 200 units, matching the lower demand.

A Firm Uses the Pure Chase Strategy of Aggregate Planning