Demand for Quiggly Pops follows an up and down pattern over the four quarters of a year, with peaks in the spring and winter months when special promotions are held. Production is handled by a highly skilled local workforce during a regular 40-hour week (i.e., overtime and subcontracting are not used). The company likes to zero out its inventory at the end of a year so that it can start fresh each January. QP currently uses a level production strategy but would like to evaluate other options. The cost and demand figures are given below. Beginning workforce = 40 workers; Production per employee = 1,250 units per quarter; Hiring cost = $500 per worker; Firing cost = $500 per worker; Inventory carrying cost = $1 per unit per quarter; Regular production cost = $10 per unit; Demand Qtr 1 = 70,000; Demand Qtr 2 = 100,000; Demand Qtr 3 = 50,000; Demand Qtr 4 = 150,000. What is the cost of a level production strategy?
$3,520,000
$3,780,000
3812000
$3,800,000