The following information relates to a company's aggregate production planning activities:

Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the number of workers required for the plan is
A)35
B)75
C)100
D)125

Question

The following information relates to a company's aggregate production planning activities:

Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the number of workers required for the plan is
A)35 
B)75 
C)100 
D)125

Quizplus · Accepted Answer

To determine the number of workers required for a level production strategy, we need to calculate the total production needed per quarter and divide it by the production per employee per quarter:
Total Production = 60,000 + 70,000 + 80,000 + 60,000 = 270,000 units
Workers Required = Total Production / Production per Employee = 270,000 / 1,250 = 216 workers
Since we are using a level production strategy, workforce level must remain constant. Therefore, we need to hire enough workers to meet the required workforce level. 
The hiring cost is $500 per worker, so the total cost of hiring 181 workers (216 - 35) is: 
181 x $500 = $90,500
We don't need to worry about firing costs in this scenario because we are using a level production strategy where workforce level is constant. 
Therefore, the best choice is to hire 181 workers, making the total workforce 216 workers.

The Following Information Relates to a Company's Aggregate Production Planning