Question

Cost data

Regular time labor cost per hour $10.00

Overtime labor cost per hour $15.00

Hiring cost per employee $84.00

Firing cost per employee $100.00

Inventory holding cost per unit per period $20.00

Shortage cost per unit per period                                                 $600.00

Material cost per unit $450.00

Capacity data

Beginning workforce (employees)                                                    200

Beginning inventory (units) 400

Labor standard per unit (hours) 6

Regular time hours available per period per employee 160

Overtime hours available per period per employee 32

Demand data

November 6000 December 5000 January 7000 February  5000 March  6000 April 5000

1. Use the data above and do a level strategy using inventory and backorders (5 steps) (9 points)

2. Use the data above and do a chase strategy using hiring and firing (5 steps) (6 points) (Note: if your calculations for # of employees are not whole numbers, please round up to be whole number)

Answer 1

1.

For Level Strategy, The workforce needs to be level. or constant.

So,

required production,

is depending the limits of,

Regular Workforce Production of 5,333 units and

OT workforce Production of 1,067 units

Total of 6,400 units.

So, there will be problem only in January. Hence we need 600 units in December as closing stock and hence the production shall increase and so will the inventory cost. To reduce OT Cost in next period, we can use excess regular workforce to produce the units.

For Chase Strategy, You hire and fire based on matching the demand.

Per Employee we have 192 hours available and hence 32 units.

Good luck