Question

In aggregate production planning, a demand-chasing production plan

a. Maximize both inventory-related costs and labor-related costs b. Minimize Inventory-related costs and maximize labor-related costs c. Minimize both inventory-related costs and labor-related costs d. Not enough information given to answer this question

Answer 1

Minimize Inventory-related costs and maximize labor-related costs is correct(that is option b is the correct)

Explanation: In aggregate production planning, a demand-chasing production plan, The demand chasing production plan is based upon the demand, so it does not store inventory. Hence, inventory related cost is minimized. But, it incurs cost related to hiring and firing of workers and their training. So, labor related cost is maximized. Therefore Minimize Inventory-related costs and maximize labor-related costs is correct