Question

for the following data, calculate the number of workers required for level production and the resulting month-end inventories. Each worker can produce 14 units per day, and thee desired ending inventory is 9000 units.

Month May June Jul Aug Total

Working Days 20 24 12 19 ________

Forecast Demand 2800 27500 28500 28500 _________

Planned Production ____-___ ______ ______ ______ _________

Planned Inventory 11,500 ______ ______ _______ _________

Answer 1

Level production is a strategy in which

• we maintain constant level of employees without hiring and firing
• we can use over time and under time

Total Production required

= 112,500 + 9000 – 11,500

= 110,000 Units

Daily Production required

= 110,000 ÷75

= 1466.67 Units

Number of workers required

= 1466.67/14

=104.76 or

105 workers

Actual number of units produced daily

= 105 x 14

= 1470 units

• Planned production for a month= 1470 * Number of working days in the month
• Beginning inventory of a month = ending inventory of previous month
• Ending inventory of a month = Beginning inventory of the month+ Planned production for the month – Demand

                                                                       

Month		May	June	July	August	Total
Working Days		20	24	12	19	75
Forecast Demand		28,000	27,500	28,500	28,500	1,12,500
Planned Production		29,400	35,280	17,640	27,930	1,10,250
Planned Inventory	11,500	12,900	20,680	9,820	9,250

Note

• Here the period is day
• The ending inventory is actually slightly higher than desired level