Practice Problems Set 4

Problem 1:

The Paris Paint Company is in the process of planning labor force requirements and production levels for
the next four quarters. The marketing department has provided production with the following forecasts
of demand for Paris Paint over the next year:

Assume that there are currently 280 employees with the company. Employees are hired for at least one
full quarter. Hiring costs amount to $1,200 per employee and firing costs are $2,500 per employee.
Inventory costs are $1 per gallon per quarter. It is estimated that one worker produces 1,000 gallons of
paint each quarter.

Assume that Paris currently has 80,000 gallons of paint in inventory and would like to end the year with
an inventory of at least 20,000 gallons.

a) Determine the minimum constant workforce plan for Paris Paint and the cost of the plan.
Assume that stock-outs are not allowed.
b) If Paris were able to back-order excess demand at a cost of $2 per gallon per quarter, determine
a minimum constant workforce plan that holds less inventory than the plan you found in part
(a), but incurs stock-outs in quarter 2. Determine the cost of the new plan.
c) Formulate this as a linear program. Assume that stock-outs are not allowed.
d) Solve the linear program. Round the variables and determine the cost of the resulting plan.

Problem 2:

The Yeasty Brewing Company produces a popular local beer known as Iron Stomach. Beer sales are
somewhat seasonal, and Yeasty is planning its production and workforce levels on March 31 for the next
six months. The demand forecasts are as follows:
As of March 31, Yeasty had 86 workers on the payroll. Over a period of 26 working days when there
were 100 workers on the payroll, Yeasty produced 12,000 cases of beer. The cost to hire each worker is
$125 and the cost of laying off each worker is $300. Holding costs amount to 75 cents per case per
month.

As of March 31, Yeasty expects to have 4,500 cases of beer in stock, and it wants to maintain a minimum
buffer inventory of 1,000 cases each month. It plans to start October with 3,000 cases on hand.

a) Based on this information, find the minimum constant workforce plan for Yeasty over the six
months, and determine hiring, firing, and holding costs associated with that plan.
b) Suppose that it takes one month to train a new worker. How will that affect your solution?
c) Suppose that the maximum number of workers that the company can expect to be able to hire
in one month is 10. How will that affect your solution to part (a)?
d) Formulate the problem levels as a linear program. [You may ignore the conditions in parts (b)
and (c).]
e) Solve the resulting linear program. Round the appropriate variables and determine the cost of
your solution.
f) Suppose Yeasty does not wish to fire any workers. What is the optimal plan subject to this
constraint?