Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters

Quarter Demand Previous quarter's output 1500 units
1 1300 Beginning inventory 200 units
2 1400 Stockout cost $50 per unit
3 1500 Inventory holding cost $10 per unit at end of quarter
4 1300 Hiring workers $4 per unit
Laying off workers $8 per unit
Unit cost $30 per unit
Overtime $10 extra per unit

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?

Plan A would cost $165,400, while Plan B would cost $167,400. In this case it is cheaper to vary workforce than to use overtime.

Plan A:
Eagle Fabrication Solution
Demand Regular Time Capacity Regular Time Production Units Increase Units Decrease
Initial Inventory
Period 1 1,300. 1,100. 1,100. 0. 400.
Period 2 1,400. 1,400. 1,400. 300. 0.
Period 3 1,500. 1,500. 1,500. 100. 0.
Period 4 1,300. 1,300. 1,300. 0. 200.
Total (units) 5,500. 5,300. 5,300. 400. 600.
@$30/unit @$4/unit @$8/unit
Subtotal Costs 159,000. 1,600. 4,800.
Total Cost 165,400.

Plan B:
Eagle Fabrication Solution
Demand Regular Time Capacity Overtime Capacity Regular Time Production Overtime Production Inventory (end PD) Units Decrease
Initial Inventory 200.
Period 1 1,300. 1,200. 400. 1,200. 0. 100. 300.
Period 2 1,400. 1,200. 400. 1,200. 100. 0. 0.
Period 3 1,500. 1,200. 400. 1,200. 300. 0. 0.
Period 4 1,300. 1,200. 400. 1,200. 100. 0. 0.
Total (units) 5,500. 4,800. 1,600. 4,800. 500. 100. 300.
@$30/unit @$40/unit @$10/unit @$8/unit
Subtotal Costs 144,000. 20,000. 1,000. 2,400.
Total Cost 167,400.