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

Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the total cost of the production plan (hiring cost,firing cost,and inventory cost)is
A)$60,000
B)$275,000
C)$335,000
D)$610,000

Question

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

Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the total cost of the production plan (hiring cost,firing cost,and inventory cost)is
A)$60,000 
B)$275,000 
C)$335,000 
D)$610,000

Quizplus · Accepted Answer

To calculate the total cost of the production plan under level production strategy, we need to calculate the inventory carrying cost, hiring cost, and firing cost.

Inventory carrying cost per quarter = 125 (beginning workforce) * 500 (production per employee) * $10 (inventory carrying cost per unit per quarter) = $625,000

Total cost of hiring = 0 (no hiring needed as level production strategy is used)

Total cost of firing = 0 (no firing needed as level production strategy is used)

Therefore, total cost of the production plan = inventory carrying cost = $625,000

Hence, the best choice is C.

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