Eagle Fabrication Has the Following Aggregate Demand Requirements and Other

Essay

Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters.
$\begin{array}{|l|l|l|l|}\hline\text { Quarter}&\text { Demand }& \text { Previous quarter's output } &1500 \text { units }\\\hline1&1300& \text { Beginning inventory } & 200 \text { units } \\\hline2&1400& \text { Stockout cost } & \$ 50 \text { per unit } \\\hline&&&\$ 10 \text { per unit at end of } \\3&1500& \text { Inventory holding cost } &\text { quarter }\\\hline 4&1300&\text { Hiring workers } & \$ 4 \text { per unit } \\\hline &&\text { Laying off workers } & \$ 8 \text { per unit } \\\hline&& \text { Unit cost } & \$ 30 \text { per unit } \\\hline &&\text { Overtime } & \$ 10 \text { extra per unit }\\\hline\end{array}$
Which of the following production plans is better: Plan A-chase demand by hiring and layoffs; or Plan B-produce at a constant rate of 1200 and obtain the remainder from overtime?