Manufacturing is making a reemergence in US. While Detroit is famous for automobiles, what is not known is that availability of skilled labor has made it an attractive location for making custom hand
crafted watches. Recently, Detroit Watch Company started making hand-crafted exotic wrist watches in Detroit. Each worker can make 10 watches per quarter. Expected demands for wallets for the next four quarters are 500, 2000, 4000 and 3500. Currently, Detroit Watch Company has 90 employees on payroll. In order to ensure high quality standards, no overtime is allowed. It costs $3000 to hire and train a worker. It costs $5000 to fire a worker. Watches are made of rare ruby movements, and it costs $10 per quarter to carry them in inventory (use end of quarter inventory values for cost related calculations). Employee wages are $2000 per quarter. Detroit Watch Company is exploring two possibilities to plan its production for the next four quarters- one policy is to have same number of workers on payroll through all four quarters (Policy 1). Another policy is to hire and fire workers as necessary for each quarter (Policy 2) so that only what is needed for a quarter is made in that quarter. Answer the following-
1. Determine employment levels, inventory levels and the total cost of the production plan for Policy 1. Show details of your work.
2. Determine the employment levels, inventory levels and the total cost of the production plan for Policy 2. Show details of your work.