Homework 14 (Solution)

Homework 14 (solution)

Chase Strategy / Jan / Feb / March / April / May / June / Total
Production Requirement / 2200 / 3000 / 4000 / 3500 / 3500 / 3000
Production Hours Required / 2200 / 3000 / 4000 / 3500 / 3500 / 3000
Working Days per month / 20 / 20 / 20 / 20 / 20 / 20
Hours per month per worker / 160 / 160 / 160 / 160 / 160 / 160
Workers required / 14 / 19 / 25 / 22 / 22 / 19
New workers hired / 0 / 5 / 6 / 0 / 0 / 0
Hiring Cost / 0 / 1500 / 1800 / 0 / 0 / 0 / 3300
Workers laid off / 4 / 0 / 0 / 3 / 0 / 3
Layoff cost / 1600 / 0 / 0 / 1200 / 0 / 1200 / 4000
Straight-time cost / 22000 / 30000 / 40000 / 35000 / 35000 / 30000 / 192000
total cost / 199300
Level Strategy
Beginning inventory / 200 / 1000 / 1200 / 400 / 100 / -200
Working days per month / 20 / 20 / 20 / 20 / 20 / 20
Production hours available (20 workers) / 3200 / 3200 / 3200 / 3200 / 3200 / 3200
Actual Production (units) / 3200 / 3200 / 3200 / 3200 / 3200 / 3200
Demand Forecast / 2400 / 3000 / 4000 / 3500 / 3500 / 3000
Ending Inventory / 1000 / 1200 / 400 / 100 / -200 / 0
Units Excess / 1000 / 1200 / 400 / 100 / 0 / 0
Inventory Cost ($5/unit) / 5000 / 6000 / 2000 / 500 / 0 / 0 / 13,500
Units Short / 0 / 0 / 0 / 0 / 200 / 0
Shortage Cost ($20/unit) / 0 / 0 / 0 / 0 / 4000 / 0 / 4000
Straight-time Cost ($10/hour) / 32000 / 32000 / 32000 / 32000 / 32000 / 32000 / 192000
Hiring 2 workers in Jan / 600 / 600
total cost / 210100
Stable Strategy
Production Requirement / 2200 / 3000 / 4000 / 3500 / 3500 / 3000
Working Days per month / 20 / 20 / 20 / 20 / 20 / 20
Production hours available (14 workers) / 2240 / 2240 / 2240 / 2240 / 2240 / 2240
Actual Production (units) / 2240 / 2240 / 2240 / 2240 / 2240 / 2240
Units Outsourced / 0 / 760 / 1760 / 1260 / 1260 / 760
Outsourcing Cost ($12/unit) / 0 / 9120 / 21120 / 15120 / 15120 / 9120 / 69600
Straight-time Cost ($10/hour) / 22400 / 22400 / 22400 / 22400 / 22400 / 22400 / 134400
Laying off 4 workers in Jan / 1600 / 1600
total cost / 205600

Remarks :

a) For the level strategy we computed the average number of workers required over the 6 month periods as follows:

# workers = (total production requirements * time required for each unit) / (total time that a worker works over the 6 months)

So , # workers =19200*1/960 =20 workers

b) For the stable strategy we computed the # workers we need for the month with the lowest requirements . This should be January and similarly to a) we have

# workers = 2200*1/160= 14 workers