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the question is complete. 16 a) b)c)d)

approxma 02, supplemented with overtime.) 16. MT makes small camping and snowmobile trailers. The demand for camping trailers occurs between January and June (mostly in April and May). MT makes camping trail- ers from January to June, shuts down in July and then makes snowmobile trailers from August to November. Suppose now is the end of December. For simplicity, we consider every two months as a period. The forecasts for camping trailers during each of the next three periods (six months) are Lo2 Period 3 Period2 Period 1 869 1,730 1,374 MT employs 40 permanent workers who are paid an average of $20 per hour (including fringe benefits) and work approximately 320 hours a period (two months). They make approximately 1,000 camping trailers per period during regular time. They can also work up to 50 percent more as overtime (i.e., up to 12 hours a day vs. the regular 8 hours a day) and will be paid 1.5 times the regular wage rate. Alternatively, MT can hire up to 40 additional temporary workers to work during a sec- ond shift. Hiring cost is $3,000 per temporary worker. ing and Master Scheduling Assume temporary workers' wa ity are the same as permanent worke temporary workers work only during rate and productiv. :. Also assume reezers, and that temporary workers work onlyd (no overtime) and are kept for whole two months or four months). Inventoue, for per camping trailer per period is S180, ad to average inventory level during each period. c there are no camping trailers on hand, and the en inventory at the end of period 3 is zero small positive number is also acceptable). MT to meet the total demand, but shortage durine wishes (except last) is acceptable, in w is assumed to be back ordered at the cost of sorage camping trailer per period. a. Calculate all the relevant unit costs. b. Suppose MT uses permanent workers during regular time and overtime. Determine the minimum cost plan in this case. (Hint: Use overtime in each de ion planner regular time ods (i.e., nt manager each quar- 3: 35,000 in Janu- , is.$180, and ischarged r of next ance in sirable. (althouc d that e are a period hich case the s per p to per ime our ry rs period.) c. Suppose MT hires temporary workers, but decides not to use permanent workers during overtime (just regu- lar time). Determine the minimum cost plan in this case. (Hint: Hire 15 temps for two periods and nine temps for one period starting in period 2.) d. Would overtime production by permanent workers and regular time production by temporary workers simul- taneously result in a lower total cost? Do a trade-of analysis. What is the overall minimum cost plan? 02 17. Mity-Lite (ML) is a manufout

Answer 1

SOLUTION:-

Forecas ts Period 2 Period 3 Period 1 869 1730 1,374 Permanent Workers 40 Regular Working Hours/ worker in a period (2 month)-320 hours Regular production 1000 units /period Costs: Regular wage rate $20/hour Overtime wage rate-$20 15 $30 Hiring Cost $2,000 Firing Cost $1,000 Inventory Holding cost- $180/per unit/per period Backorder Cost $600/per unit/per period a). All the relevant unit costs are as follows: L Average cost (regular hrs 8 per day $20 per hrs for 320 hrs) of permanent employee for two months 56,400 (20*320) 2. Average cost (overtime hrs 4 per day $30 per hrs for 160 hrs) of permanent employee for two months S4,800 (30 160) 3. In terms of per day average regular cost of permanent worker is 20*8-160 and overtime cost is 30*4 120 Assuming 40 working days per period of 320 hours, 1, 2 and 3 are consistent 4. Additional temporary worker have the same average cost of $6400 but no overtime allowed Unit Hiring cost is $2000 per worker 6. Unit Lay-off cost is $1000 per worker 7 Unit Inventory holding cost is $180 per period 8. Shortage cost is $600 per unit per period b) b). MT uses permanent workers during regular and overtime t is given 1000 units are made in regular hours by 40 permanent workers, therefore per unit cost in regular hours is (6400 40V1000 $256 Similarly 500 un its in overtime hours by 40 workers is (4800 40)/500-$384 Difference between unit costs of overtime and regular time is $128 Thus if a unit is made in regular time and carry forward to next period, total cost will be $308, including carrying cost of $180, which is less than overtime cost of $384 Therefore we should make 1000 units in period 1 even the demand is less because number of units in period 2 is much more than 1000 and cost of overtime as well as that of shortages is on the higher side Balance of 131 (1000-869) will cater to Period 2 which requires total of 1730, In period 2 we can have 1000 as regular hours and 500 as overtime hours output but still there will be shortage of 99 units (1730- 131+1000+500)) Shortage cost is $600 whereas unit produced in period 1 in overtime hours and carried forward will cost 5564 (384+180), therefore 99 units are made during overtime hours of period 1 to have no shortages in period 2 In period 3, the total demand of 1374 units is met with 1000 units in regular hours and balance(374 <500) to be made in overtime hours Note units in overtime hours in perod 1 should not be carried to period 3 as it will cost 384+180+180 744 which is more than cost of shortage of 600. Total minimum cost is 256000+30492 +256000 +192000 +256000+143616-1,134,108 approx imately 1000 units in regular hours in each period, 99 units in overtime hours of period 1 carried to period 2, 500units in overtime hours of period 2 and finaly 374 units in overtime hours of period 3 c) Period 1 demand is less than the production ie. 1000. Total cost 256,000 The extra amount will be carried

forward to meet the demand in next period. In the next period, extra production requirement is (1730-1000+131) 599. Regular production-1000 and Carryover 131 Hired workers produce at 25 per period. Hence, workers required to produce 599 units are 599/25-24 cost+ Hiring cost+ Temporary worker wage) =256000+(180"131)+(2000"24)+ (6400"25):487,580 1 unit will be carried to period 3 (24*25)-599-1 In period 3, production requirement- 1374-(1000+1)-373. Hence temporary worker requirement 373/25-15 Already temporary worker available is 24. So, need to fire 24-15-9. Firing cost-9 1000 $9,000 So total cost-Period 3 (Regular production cost+ Carrying cost+ Firing cost+ Temporary worker wage) =256000+(180" 1)+(9000)+(6400* 15)=$361,180 Total cost of this plan 256,000+487,580+361,180-1,104,760
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