The Austin, Texas plant of Computer Products produces disk unitsfor personal and small business computers. Gerald Knox, the plant’sproduction planning director, is looking over next year’s salesforecasts for these products and will be developing an aggregatecapacity plan for the plant. The quarterly sales forecasts for thedisk units are as follows:

1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2,310	1,980	1,980	2,340

Ample machine capacity exists to produce the forecast. Each diskunit takes an average of 20 labor-hours. In addition, you havecollected the following information:

1. Inventory carrying cost is $100 per disk unit per quarter. Thecost is applied to all units in inventory at the end of aquarter.
2. The plant works the same number of days in each quarter, 12five-day weeks, 6 hours per day.
3. Beginning inventory is 150 disk units. These will be used tohelp satisfy the 1^st Quarter demand.
4. In a backlog situation, the customer will wait for his order tobe filled but will expect a price reduction each quarter he waits.The backlog costs are $300 per disk for the first quarter thecustomer waits, $700 for the second quarter the customer waits, and$900 for the third quarter the customer waits. In filling orders,backlogged items will always be filled before current quarteritems,
5. The cost of hiring a worker is $800 while the cost of layingoff a worker is $950.
6. The straight time labor rate is $20 per hour for the firstquarter and increases to $22 per hour in the fourth quarter.
7. Overtime work is paid at time and a half (150%) of the straighttime work.
8. Outsourcing (contract work) is paid at the rate of $475 perdisk unit for the labor and Computer Products provides thematerial.
1. Demand during the fourth quarter of the prior yearwas 1,800 units and was fulfilled using a workforce working at fullutilization. The demand for the first quarter of the next year(year following the year you are analyzing) is projected to be atthe 2,340 unit level.

Compare the following two sales and operations plans.

i) The company will use a matching (chasing) demand strategy forthe first two quarters. For quarters three and four, it will use alevel production strategy with no overtime, no shortages duringthese quarters and no inventory leftover at the end of the fourthquarter. What is the total cost of this option, excluding thematerial cost?

ii) The company will establish in quarter one and then maintaina workforce capable of producing 2,160 units in a quarter. If thereare more workers in a quarter than required to produce the demandfor that quarter, only the units required will be produced in thatquarter and there will be underutilization. If demand is greater ina quarter than can be produced by the available workforce usingstraight time labor, the excess units will be outsourced. What isthe total cost of this option, excluding the material cost?