A factory is scheduling hiring staff for the months of March, April, and May, to work in
Question:
A factory is scheduling hiring staff for the months of March, April, and May, to work in the production department. Staff can work standard hours and overtime.
The standard hourly rate is $10 and the overtime is $15. The economic department of the factory has scheduled the following salaries to be paid in these months:
March: 2000 regular hours and 600 overtime hours
April: 1800 regular hours and 500 overtime hours
May: 2000 regular hours and 700 overtime hours
In each working hour (regular or overtime) two units of product are produced. The demand is expected to be 3800, 4200, and 4600 units for the months of March, April, and May, respectively and the marketing department has set as requisite that this demand is satisfied each month. Initially, there is no stock at the end of February. If there is stock at the end of a month, it may be stored to meet the demand of the following months, with a monthly storage cost of $2 per unit.
No stock is allowed after the end of the three months, thus the end of May. What is the optimum number of regular and overtime hours for the months of March, April, and May, minimizing the total production and storage costs?
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young