A company has the following demand forecast next year, expressed in six bimonthly periods: Forecast Demand:...
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A company has the following demand forecast next year, expressed in six bimonthly periods: Forecast Demand: Period 1-4,500 units Period 4-6,500 units Period 2-3,000 units Period 5-5,100 units Period 3-4,800 units Period 6-5,500 units The company begins the planning year with 500 units of inventory as safety stock and finish the year with the same inventory amount. The following cost data have been obtained: Each employee works 160 regular working hours per month Each unit requires 2 standard hours to produce The labour costs are $20 per normal hour and $27 per overtime hour It costs $4 per month to hold an item in the warehouse Question The company wants to determine the cost of meeting demand by using a mixed strategy which involves changes in the number of employees and the use of overtime work. To keep from adding too many temporary employees during the peak demand period, the company will use overtime equal to up to 20% of the regular-time hours available. The company has 25 employees at the end of the current year (i.e. at the beginning of period I of the following year which is being planned), and wants to end period 6 of the planning year with the same number of employees, i.e. 25 employees. It costs $400 to hire and $500 to lay off an employee. In the beginning of each period, if available regular time with current employees is not sufficient to produce the demand of that period, overtime is used. A new employee is hired only if current employees are not enough to produce the required products of that period even if they work 20% overtime. In this situation, new employees will be hired to work during both regular time and overtime (maximum of 20% overtime). In the beginning of each period, if the required time to produce the demand of that period is less than the available production time (with current number of employees working both regular and overtime), some of the employees will be fired until the total available time (including both available regular and overtime) is enough to produce the demand of that period. a) Find the employment level for each bimonthly period. b) Find the total payroll-related costs for the year. e) What cost per unit results from these payroll-related costs? d) What is the total cost of this option (including labour and inventory cost)? Note: Round up the decimal number of employees, e.g. 36.4 is round up to 37. A company has the following demand forecast next year, expressed in six bimonthly periods: Forecast Demand: Period 1-4,500 units Period 4-6,500 units Period 2-3,000 units Period 5-5,100 units Period 3-4,800 units Period 6-5,500 units The company begins the planning year with 500 units of inventory as safety stock and finish the year with the same inventory amount. The following cost data have been obtained: Each employee works 160 regular working hours per month Each unit requires 2 standard hours to produce The labour costs are $20 per normal hour and $27 per overtime hour It costs $4 per month to hold an item in the warehouse Question The company wants to determine the cost of meeting demand by using a mixed strategy which involves changes in the number of employees and the use of overtime work. To keep from adding too many temporary employees during the peak demand period, the company will use overtime equal to up to 20% of the regular-time hours available. The company has 25 employees at the end of the current year (i.e. at the beginning of period I of the following year which is being planned), and wants to end period 6 of the planning year with the same number of employees, i.e. 25 employees. It costs $400 to hire and $500 to lay off an employee. In the beginning of each period, if available regular time with current employees is not sufficient to produce the demand of that period, overtime is used. A new employee is hired only if current employees are not enough to produce the required products of that period even if they work 20% overtime. In this situation, new employees will be hired to work during both regular time and overtime (maximum of 20% overtime). In the beginning of each period, if the required time to produce the demand of that period is less than the available production time (with current number of employees working both regular and overtime), some of the employees will be fired until the total available time (including both available regular and overtime) is enough to produce the demand of that period. a) Find the employment level for each bimonthly period. b) Find the total payroll-related costs for the year. e) What cost per unit results from these payroll-related costs? d) What is the total cost of this option (including labour and inventory cost)? Note: Round up the decimal number of employees, e.g. 36.4 is round up to 37.
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To solve this problem well follow these steps Step 1 Calculate the demand for each period Step 2 Calculate the required production hours for each period based on demand and available regular time and ... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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