A tutoring center experiences a seasonal demand pattern for its services. Labor requirements over a typical six-month period follow. As a service industry there is no ability to hold inventory or take backorders, all demand must be met or it will be a lost sale.
Period 1 2 3 4 5 6 Total
Requirement 10 9 8 10 9 8
Utilized Cost
Unutilized Cost
Overtime Cost
Hiring Cost
Layoff Cost
Total Costs
Costs associated with operations are as follows:
Wages = $2,000 per worker per month
Hiring cost = $1,000 per worker
Layoff cost = $1,500 per worker
The current workforce level is 10 workers. Use the preceding data to answer the following questions:
a. What is the total cost of a staffing plan, including the cost of regular wages, hiring, and layoffs using a chase strategy with hiring and layoffs, but no overtime?
b. What is the total cost of the staffing plan, using a level strategy in which no overtime is allowed and the undertime paid for?
c. Suppose that overtime is allowed up to 25% of the regular-time capacity, and that overtime wages are 150% of the regular-time rate. What is the total cost of the level strategy with overtime and undertime that also minimizes undertime?
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