Question

The owner of a small mill-working plant that builds cabinets is developing his aggregate plan for the next year. The relevant cost data and forecast for the next 4 quarters is provided below. The company currently has 20 employees and works one 8 hour shift each day with 2 paid 15 minute breaks. Assume each quarter has 65 working days, and that it currently has no units in stock. Use this information and the information from the table to answer the questions below.

P301 Problem 7 The owner of a small mill-working plant that builds cabinets is developing his aggregate plan for the next year. The relevant cost data and forecast for the next 4 quarters is provided below. The company currently has 20 employees and works one 8 hour shift each day with 2 paid 15 minute breaks. Assume each quarter has 65 working days, and that it currently has no units in stock. Use this information and the information from the table to answer the questions below. Costs Forecast Other Data Holding Cost/Unit/Quarter Hiring Cost Layoff Cost $18.50 Qtr 1 1500 Labor Hours/Unit 7 $2,000.00 Qtr 2 Beginning Inventory 1200 $2,250.00 $100.00 Qtr 3 Work days per Quarter 2100 65 Subcontract Cost Qtr 4 1650 Avg. Labor Cost/Hour 18.00 $27.00 Overtime Labor Cost/Hour Part I 1) If the company used a chase demand startegy and rounded any fractional number of employees to the nearest whole number, how many employees would be used in each quarter? Qtr 1 Qtr 2 Qtr 3 Qtr 4 1200 1650 Forecast 1500 2100 Hours Req Workers Req Workers Used 2) If the company used a level capacity strategy and rounded any fractional number of employees to the nearest whole number, how many employees would be used? Period 1 2 3 4 1650 Forecast 1500 1200 2100 Hours Req. Workers Req. Workers Used

Answer 1

part I

1)

	Qtr1	Qtr2	Qtr3	Qtr4
Forecast	1500	1200	2100	1650
Production	1500	1200	2100	1650
Hours req.	10500	8400	14700	11550
Workers Req.	2	-5	13	-6
Workers used	22	17	30	24

Working hours per quarter per employee = 65*7.5 hours = 487.5 so workers required = Hours required/487.5

Workers required = Additional workers that are needed to satisfy Workforce needed for the production

2)

	Qtr1	Qtr2	Qtr3	Qtr4
Forecast	1500	1200	2100	1650
Production	1612.5	1612.5	1612.5	1612.5
Hours req.	11287.5	11287.5	11287.5	11287.5
Workers Req.	3	0	0	0
Workers used	23	23	23	23

Production = 6450/4 = 1612.5

Workers required = Additional workers that are needed to satisfy Workforce needed for the production

3)

	Qtr1	Qtr2	Qtr3	Qtr4
Forecast	1500	1200	2100	1650
Workers used	23	23	23	23
Hire/(Fire)	3	0	0	0
Production	1612.5	1612.5	1612.5	1612.5
Production-Forecast	1612.5	1612.5	1612.5	1612.5
Inventory:
B.I	0	112.5	525	37.5
E.I	112.5	525	37.5	0
Average	56.25	318.75	281.25	18.75
Overtime production	0	0	0	0
Overtime hours	0	0	0	0
Hiring cost	6000	0	0	0
Firing cost	0	0	0	0
Regular Output	203175	203175	203175	203175
O.T	0	0	0	0
Subcontract	0	0	0	0
Inventory	1040.625	5896.875	5203.125	346.875
Backorder	0	0	0	0
Total cost	210215.6	209071.9	208378.1	203521.9
Total cost for plan	831187.5

Overtime cost for this plan = 0