PP.51 A small manufacturer of specialty welding equipment has developed a chase production plan for the next four quarters, as seen below:

Supply/Demand Info	  Pre-Q1  	     Q1     	     Q2     	     Q3     	     Q4     
Forecast (demand)	 	3,520	3,960	3,630	3,740
Regular production	 	3,520	3,960	3,630	3,740
Subcontract production       	 	 	 	 	 
Ending inventory	 	 	 	 	 
Hired employees	 		4		1
Fired employees	 	5		3	
Total employees	37	32	36	33	34

The table below shows additional relevant information:

Capacity Information & Cost Variables       	                  
Production rate (units/employee/quarter)	110
Subcontractor capacity (units/quarter)	500
Regular production cost/unit	$68
Holding cost/unit/quarter	$14
Hiring cost/employee	$860
Firing cost/employee	$2,400
Subcontract cost/unit	$122

What is the overall total cost for this production plan? (Display your answer to the nearest whole number.)
  
Number
 

What is the total regular production cost for this production plan? (Display your answer to the nearest whole number.)
  
Number
 

What is the total holding cost for this production plan? (Display your answer to the nearest whole number.)
  
Number
 

We are tasked with calculating three values based on the provided production plan for a specialty welding equipment manufacturer:

1. **Total overall cost** 
2. **Total regular production cost**
3. **Total holding cost**

### Key Data:

- Forecasted demand for Q1–Q4: 3,520, 3,960, 3,630, 3,740 units.
- Regular production matches demand, so no need for subcontracted production.
- Ending inventory is not provided, so assume no units held across quarters unless implied otherwise.
- Costs:  
  - Regular production cost/unit: $68  
  - Holding cost/unit/quarter: $14  
  - Hiring cost/employee: $860  
  - Firing cost/employee: $2,400  
  - Production rate per employee per quarter: 110 units  

### Step-by-Step Calculation

---

#### 1. **Total Regular Production Cost**

Regular production exactly matches demand in each quarter, so the total regular production cost can be calculated as follows:

\[
\text{Total Regular Production Cost} = (\text{Total Production Units}) \times (\text{Production Cost/Unit})
\]

Where the total production units are:

\[
\text{Total Production Units} = 3,520 + 3,960 + 3,630 + 3,740 = 14,850 \text{ units}
\]

Thus:

\[
\text{Total Regular Production Cost} = 14,850 \times 68 = 1,009,800
\]

---

#### 2. **Total Holding Cost**

Since the problem does not specify ending inventory, and regular production equals demand, we will assume zero ending inventory. This means the holding cost for this chase production plan is **$0**.

---

#### 3. **Overall Total Cost**

To calculate the overall total cost, we need to consider:
- Total regular production cost
- Hiring and firing costs (no subcontracting since production matched demand)

##### Hiring Cost:

The number of employees hired each quarter:
- Q1: 4
- Q2: 1
- Q3 and Q4: 0

So, total hiring cost:

\[
\text{Hiring Cost} = (4 + 1) \times 860 = 5 \times 860 = 4,300
\]

##### Firing Cost:

The number of employees fired:
- Q1: 5
- Q2: 3
- Q3 and Q4: 0

So, total firing cost:

\[
\text{Firing Cost} = (5 + 3) \times 2,400 = 8 \times 2,400 = 19,200
\]

##### Overall Total Cost:

\[
\text{Overall Total Cost} = (\text{Regular Production Cost}) + (\text{Hiring Cost}) + (\text{Firing Cost})
\]

\[
\text{Overall Total Cost} = 1,009,800 + 4,300 + 19,200 = 1,033,300
\]

---

### Final Answers:
1. **Overall Total Cost**: \$1,033,300
2. **Total Regular Production Cost**: \$1,009,800
3. **Total Holding Cost**: \$0

---

Would you like further explanation or details on any part of this? Here are five related questions to consider:

1. What would happen to the total cost if subcontracted production was required?
2. How would a backlog of inventory impact holding costs and overall total cost?
3. How does varying production rates affect the cost structure in such a chase production plan?
4. Could a level production plan be more cost-effective in this scenario?
5. How can optimizing employee hiring and firing further reduce costs?

**Tip**: When using a chase production strategy, it's crucial to minimize fluctuations in employment to control hiring and firing costs.

PP.51 A small manufacturer of specialty welding equipment has developed a chase production plan for the next four quarters. What is the overall total cost for this production plan? What is the total regular production cost for this production plan? What is the total holding cost for this production plan?

Explore how to calculate the total cost, regular production cost, and holding cost for a small manufacturer’s chase production plan. The problem involves demand forecasting, employee hiring and firing costs, and regular production costs over four quarters.

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