The forecasts for a product for the next three months are given as 750, 850 and 1000 units. The number of regular time days and overtime days available are 22, 18 22 and 4, 4, 5 respectively. With the existing number of employees, the company can produce 38 units per day. to meet the high demand in the third month, the company decides to hire the third month, the company decides to hire people to increase the daily production to 45 units.
The following costs are given:
Cost of regular time production = Rs. 20 per unit
Cost of overtime production = Rs. 25 per unit
Cost of hiring = 200L2
Where ‘L’ is the increase in daily capacity
Inventory = Rs. 10 per unit per month (based on average inventory)
Shortage (backordering cost) = Rs. 20 per unit per month
The beginning inventory is 100 units. The company decides to produce 800, 700 and 900 units respectively in the three months. Compute the cost of the production plan.