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Rowley Apparel, manufacturer of the famous “Race-A-Rama” swimwear line, needs help planning production for next year. Demand for swimwear follows a seasonal pattern, as shown here. Given the following costs and demand forecasts, test these four strategies for meeting demand: (a) level production with overtime and subcontracting, as needed, (b) level production with backorders as needed, (c) chase demand, and (d) 3000 units regular production from April through September and as much regular, overtime, and subcontracting production in the other months as needed to meet annual demand. Determine the cost of each strategy. Which strategy would you recommend?
Month
Demand Forecast
January
1000
February
500
March
500
April
2000
May
3000
June
4000
July
5000
August
3000
September
1000
October
500
November
500
December
3000
Beginning workforce
8 workers
Subcontracting capacity
unlimited
Overtime capacity
2000 units/month
Production rate per worker
250 units/month
Regular wage rate
$15 per unit
Overtime wage rate
$25 per unit
Subcontracting cost
$30 per unit
Hiring cost
$100 per worker
Firing cost
$200 per worker
Holding cost
$0.50 per unit/month
Backordering cost
$10 per unit/month

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