The S&OP team at Kansas Furniture, has received estimates of demand requirements as shown in the table. Assuming one-time stockout costs for lost sales of $125 per unit, inventory carrying costs of $20 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis:
Plan B: Vary the workforce to produce the prior month’s demand. The fim produced 1,300 units in June. The cost of hiring additional workers is $30 per unit produced.