Question

1.How much slack capacity does Athletic Kit have?

Knitting the jerseys was an important aspect of the production process. AK used a variety of knitting machines, with the striped knitting machine being the most crucial one as it was able to produce all 40 different styles and colour combinations that the company offered (see Exhibit 4). Currently, AK operated nine of these machines and owned another two that were broken but could potentially be repaired for a cost of $25,000 each. AK had a One employee was responsible for operating three machines and was paid $18.50 per hour. Labour laws allowed AK to run two hours of overtime per day and six hours overtime on a Saturday. Overtime pay was 1.5 times regular pay. Changing the set-up of the machine to another style required on average three labour hours. capacity to produce 460 jerseys per eight-hour shift on these machines Each jersey was $9.50 per kilogram.3 In addition, the dyeing of the fabric cost $3 per kilogram of cloth. Daniel estimated that AK's holding cost of inventory was around 10 per cent. However, this estimate was before taking cost of obsolescence or cost of capital into account. produced from 1.5 metres of woven cloth on rolls. The cost of material was on average Inventory and Production Planning The manufacturing of hockey jerseys was a hockey jersey sales was from August 15 to October 31: during this period, AK usually sold 44 per cent of its products. During the periods from July 15 to August 14 and November 1 to November 30, AK usually sold 10 per cent of its products, respectively. For each of the remaining months of the year, AK sold between 4 per cent and 6 per cent of its products. highly seasonal business. Historically, the peak time for Because of capacity constraints, AK knitted at a constant rate throughout the year to ensure enough inventory for peak season. Inventory usually peaked in the middle of May, with about 24 to 28 weeks of stock, and then slowly decreased to only eight to 10 weeks in December. To ensure that the knitting department was operating efficiently, AK had a minimum order quantity policy of 360 units. Although predicting demand was extremely difficult, the inventory built up in advance of the peak selling season had proven to be enough to meet the vast majority of customer demands Including a table below to help you with that...(the details have been obtained from Page 3 of the case) Total Capacity- With Over Season Weeks % Sales Regular Сараcity (in jerseys)Utilization Regular Сараcity Total Demand Сараcity Utilization Time Aug 15-Oct 31 July 15-Aug 14 11 44% 4 10% Nov 1 Nov 30 4 10% Dec 1 -July 14 32 36% 52 Total 100% 85,168 Note Total demand is 85,168 from Exhibit 4 For Capacity (use the following) One regular 8 hour shift could produce 460 jerseys (Page 3) Over time is 2 hours per day, therefore they could produce - Assume 250 working days (disregard weekends Sat and Sun). (calculate the amount)

Answer 1

assuming five days per week.

In 2 hours overtime they can produce 460x2/8 = 115 jerseys.

Season	weeks	% sales	demand	Reg capacity	OT Cp	Total cap	Total cap utilisation
1	11	44	37474	25300	6325	31625	100%
2	4	10	8517	9200	2300	10500	81.14%
3	4	10	8517	9200	2300	10500	81.14%
4	32	36	30660	73600	18400	92000	33.33%
total	52		85168	117300	29325	144625	58.88%

For season 1, they would not be able to satisfy the demand even with overtime. Hence the entire capacity including overtime would be utilised.