Question

# Trexoid Inc. makes a popular video game console. Demand varies each month, with highest demand coming...

Trexoid Inc. makes a popular video game console. Demand varies each month, with highest demand coming in the last quarter of the year. Regular production costs are \$250 per unit and inventory carrying cost is \$3 per unit per quarter. Overtime production cost is \$280 per unit. Assume that the 20 current Trexoid employees can produce a total of 30,000 units per quarter in regular production and can work enough overtime hours to produce the amount required if a chase plan is employed. On the other hand, hiring cost is \$6,000 per employee and firing cost is \$11,000 per employee. Trexoid currently has zero inventory on hand, and they would like to have zero inventories at the end of the year. Assume hiring and layoff/firing, if necessary, occur at the beginning of the quarter. Forecasted demand is as follows:

Quarter 1 24,000 units
Quarter 2 24,000 units
Quarter 3 54,000 units
Quarter 4 90,000 units

a. Given the above demand estimate, develop a production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.)

 Level Production Plan Quarter Demand Regular Production Ending Inventory Number of Workers Hire Fire 1 24,000 2 24,000 3 54,000 4 90,000 Total 192,000

b. Determine the cost of the level production plan.

c. Given the planning information, develop a production plan based on chase production. (Leave no cells blank - be certain to enter "0" wherever required.)

 Chase Production Plan – Overtime with Stable Workforce Quarter Demand Regular Production Overtime Production Ending Inventory Number of Workers 1 24,000 2 24,000 3 54,000 4 90,000 Total 192,000

 Chase Production Plan – Changing Workforce Levels Quarter Demand Regular Production Ending Inventory Number of Workers Hire Fire 1 24,000 2 24,000 3 54,000 4 90,000 Total 192,000

 Total cost if overtime production used Total cost if workforce size adjusted

Solution :

Part A and B :

Total Cost : 48,414,000

Part C :

Chase Plan with Overtime : Total Cost : 50,214,000

Chase Plan with variable workforce size : Total Cost : 48,308,000

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