John Jones,senior VP for Zanda Corp.,is looking at three alternative aggregate production plans for the next six-month period.At his company,demand varies by month with substantial month-to-month differences.The three alternatives are a "pure level plan," which keeps an absolutely constant workforce,a "pure chase plan" relying on hiring and layoffs,and a hybrid plan.He is most likely to find that the hybrid plan:
A)Has lower inventory carrying cost than the level plan and lower hiring/layoff cost than the chase plan.
B)Has higher hiring/layoff cost than the chase plan and higher inventory carrying cost than the level plan.
C)Has lower inventory carrying cost than the chase plan and higher hiring/layoff cost than the level plan.
D)None of these selections.

Question

Quizplus · Accepted Answer

The hybrid plan typically balances the costs by not keeping inventory as high as the level plan (thus lower inventory carrying costs) and not requiring as many hiring/layoffs as the chase plan (thus lower hiring/layoff costs).