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 pure level plan:
A)Has lower inventory carrying cost than the hybrid plan.
B)Has higher hiring/layoff cost than the chase plan.
C)Has higher hiring/layoff cost than the hybrid plan.
D)Has higher inventory carrying cost than the chase plan.

Question

Quizplus · Accepted Answer

The pure level plan maintains a constant workforce, which means that inventory levels are likely to be higher than they are with the pure chase plan, where the workforce fluctuates to match demand. Therefore, the pure level plan will have higher inventory carrying costs than the pure chase plan. The hybrid plan may be a compromise between the two, but the question does not provide enough information to compare the hybrid plan to the pure level plan in terms of inventory costs. The question also does not provide enough information to compare hiring and layoff costs for the different plans, so we cannot determine whether the pure level plan has higher or lower hiring/layoff costs than the other plans.