Question

Complete the following SOP table using the Leveling strategy. Note that the actual inventory at the end of last year is 100 units, and your actual number of employees at the end of last December was 8. Use the following data, and compute all costs associated with this level strategy. Note that filling out the following SOP table is not sufficient in answering this question.

Hiring cost is $200 per employee

Firing cost is $500 per employee

Inventory holding cost per item per day is $15

The required number of hours per unit is 2 hours/unit

Labor rate per employee is $124 per day

Material cost per item is $30

Please count inventory cost only for working days given

Each employee is working 8 hours per day.

Note that any inventory shortage is not allowed. That is, if the ending inventory for a particular month is negative, the beginning inventory for the next month is 0.

Sales Forecast December last year March total Operations plan production unit num ber ofemployees orking days/month Inventory planned inventory actual inventory 100

Please give me correct answer with excel sheet.

Answer 1

Answer - In a level strategy, we try to keep the production stable by keeping the workforce stable. We produce more at times and keep inventory to meet demand fluctuations in coming months.

The objective of the whole plan was to produce a stable production plan without creating stockout situation and minimizing inventory.

• If we hire 2 employees in Jan we have a shortage in production so I hired 3. I did not hire more as it would create a lot of inventory
• If we hire less than 5 in Feb we have a shortage, so 5 people were hired and new employee workforce =16
• Now, if I kept a constant workforce of 16 over next 4 months our inventory cost was increasing by $400K, so I fired 2 employees in March and built a stable production till June to meet demand in June. The stable workforce was kept for months March-June

Number of workers initially Number of hours for one unit total hours in a working day 8 Formula Cost of labor 15.50 $124/ day, 124/8 hours $200 $500 Cost of material Inventory cost per unit per day S 30.00 $15

anuar 1000 Februar March 1050 Demand MMa 1200 100 1200 1300 Beginning inventory tion required (anticipated Begi inventor) 1132 1030 898 046 Total Hours required for aboue production Days Hours available: # of days.# of workers. 8 hours 1800 2264 2060 1796 1732 2092 1936 968 2304 1152 2464 1232 2464 1232 2240 1120 2240 1120 Actual production Total Employee 14 14 14 14 Emplouee Hired Emplouee Fired Inventory Production required - Production) 20 74 ost Chart Labor Cost [Hours used'cost per hour for labor Material Cost (Units produced cost of material Cost of hirin Cost of firin Inventory costnventory No. of working days 15) Total Cost 30,008.00 29,040.00 34,560.00 35,712.00 38,192.00 36,960.00 36,960.00 33,600.00 33,600.00 $ 600.00$1000.00$ 22,440.00 82,088.00 76,672.00 1,000.00 66,660.00 142,812.00 5,400.00 76,200.00$22,200.00 144,520.00 $90,520.00 185,372.00 721,984.00

Note - We may be able to further optimize cost by using a Chase strategy which is hire-fire employees.

HIRE -FIRE Strate Januar March 1050 MMa 200 Demand Beginning inventory Produ inventor Total Hours required for above production 200 100 1300 ction required (anticipated . Begi 1074 1800 2264 2060 2148 2260 2460 Days Hours available : # of days.# of workers. 8 hours 1936 968 2304 1152 2288 1144 2400 200 2560 1280 ctual production 1056 Total Employees Emplouee Hired Emplouee Fired Inventory Production required Production) 20 ost Chart 30,008.00 35,712.00 29,040.0034,560.00 $ 600.00$1000.00$ Labor Cost (Hours used'cost per hour for labor Material Cost (Units produced cost of material Cost of hirin Cost of firin Inventory costnventory No. of working days 15) Total Cost 31,680.00 $ 200.00$200.00 ,000.00$ 8,580.00 22,440.00$ 5.400.00 $ 82,088.00$76,672.0074,996.00 $ 92,884.00 $94,400.00 $93,280.00514,320.00 23,100.00