Question

Gretchen's Kitchen is a​ fast-food restaurant located in an ideal spot near the local high school. Gretchen Lowe must prepare an annual staffing plan. The only menu items are​ hamburgers, chili, soft​ drinks, shakes, and french fries. Based on the forecasted demand, Ms. Lowe estimates the workers needed for the next 12 months (see table below).

The restaurant currently has 10​ part-time employees who work 80 hours a month on staggered shifts. Wages are​ $1200 per month for regular time; overtime wages are 150% of regular time wages. An employee is limited to 25% of regular time capacity. Hiring and training costs are​ $500 per new​ employee, and layoff costs are​ $300 per employee.

1. For a level strategy in this service example:

1. Which decision variable is maintained constant in the planning horizon? What factor varies?

2. What particular piece of information helps you decide the number of workers needed?

3. Provide the number of workers needed if maximum overtime is used?

4. Provide the complete level strategy if maximum overtime is used?

Month	1	2	3	4	5	6	7	8	9	10	11	12
Workers needed	9	9	9	10	11	12	15	14	13	10	9	9
Planned Workers
# if Hires
# of Layoff
OT

2. What is the cost of the level strategy?

Answer 1

a.

It's a level strategy. So, number of workers is the variable, that is maintained constant.

Overtime (OT) varies.

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b.

Workers needed and max overtime capacity helps us determine the number of workers needed.

Based on maximum number workers needed in any month and max overtime , we can determine the level workforce needed

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c.

Maximum demand (workers needed) = 15 (in month 7)

Using maximum overtime, number of workers needed = 15/1.25

= 12

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d.

Aggregate plan based on level strategy is following:

Total regular time wages = 12*12*1200 = $ 172,800

Total overtime cost = 6*1200*150% = $ 10,800

Total cost of level strategy = Regular time wages + overtime cost

= 172800+10800

= $ 183,600