A small appliance manufacturer must meet (on time) the following demands: quarter 1, 3000 units; quarter 2, 2000 units, quarter 3, 4000 units. Each quarter, up to 2700 units can be produced with regular time labour, at $40 per unit. An unlimited number of units can be produced each quarter using overtime labour at $60 per unit. Of all units produced, 20% are unsuitable and cannot be used to meet demand. Also, at the end of each quarter, 10% of all units on hand spoil and cannot be used to meet any future demands. After each quarter’s demand is satisfied and spoilage is accounted for, a cost of $15 per unit in ending inventory is incurred 

a) Determine how to minimise the total cost of meeting the demands of the next three quarters12. Assume that 1000 usable units are available at the beginning of quarter one13.

Hint: In one paragraph, explain the process and provide numbers. For instance, “the manufacturer should manufacture, in total, XXXX units in regular production, and XXXX units in overtime. This will be achieved through manufacturing XXXX units in regular time in the first quarter...” So, you need to calculate how much regular time labour and how much overtime labour to use to meet quarterly demands. 

b) The company wants to know how much money it would be worth to decrease the percentage of unsuitable items and/or the percentage of items that spoil. Write a short report that provides relevant information. For each of the following scenarios, you will need to run Solver and store the results for final comparison: 

i) Where the percentage of unsuitable items decreases by 5% and the percentage of items that spoil stays at 10%, 

ii) Where the percentage of unsuitable items stays at 20% and the percentage of items that spoil decreases by 5%, 

iii) Is the sum of the separate effects on total cost from the first two scenarios equal the combined effect from the third scenario when both percentages decrease by 5%?Hint: Include an answer to this question in your report for each part less than a paragraph such as the following example. Something like: “Having an XX% reduction in unsuitable units would save XXXX, therefore, the manufacturers should not spend more than this amount in trying to reduce spoilage by this percentage.” You only have to include one model exactly like the template provided. Just change the numbers and report outputs. Once you've completed your spreadsheet then include the following paragraph to compare the three scenarios: “Compared to reducing spoilage and unacceptable percentages separately, the total cost reduction of reducing both simultaneously was $XXXX more/less than the cost reduction of reducing one separately. This is due to the compounding effect of reducing spoiled units, which would lead to a reduction in unsuitable units.” If there is no compounding effect, then change your position to no compounding effect.

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X Question 4 Q Search Sheet Home Insert Page Layout Formulas Data Review View + Share * Cut 2 AutoSum マ。 Calibri (Body) 12 - A A- S Wrap Text General O Copy Fill - A H Merge & Center $ % ) +.0 .00 .00 .0 Conditional Format Formatting as Table Cell Styles Paste BIU Insert Delete Format Sort & Format Clear Filter : x v fx G19 P R T V Y AA AB AC AD 2 4 Solution Three Solution Four Unsuitable Production Spolied Inventary Unsuitable Production 6 Spolied Inventory 7 8. 3 Quarter 2 Quarter 1 2 3 Demand Demand 10 Production Production 11 Production (OT) Production (OT) 12 Inventory Inventory 13 14 Inv+Prod+Prod(0OT)-Demand Inv+Prod+Prod(OT)-Demand 15 16 Production Cost Production Cost 17 Production Cost (OT) Production Cost (OT) 18 Inventory Cost Inventory Cost 19 Production Capacity Production Capacity (OT) Production Capacity Production Capacity (OT) 20 21 22 Inventory Capacity Inventory Capacity 23 Production Cost Production Cost (OT) Production Cost 24 25 Production Cost (OT) Inventory Cost Total Cost 26 Inventory Cost Total Cost 27 28 29 tal cost falls/incr As a result of reducing unsuitable production from XX% to XX%, total cost falls/incr Reducing both spoiled inventory (10% -> 5%) and unsuitable production (20% -> 10%) results in a cost reduction/increase of $XXXXXXX. 30 This is greater/smaller than the sum of the cost savings which arise as a result of implementing these initiatives individually. 31 32 33 34 35 36 37 28 Sheet1 + Ready 112% I| X Question 4 Q Search Sheet Home Insert Page Layout Formulas Data Review View + Share * Cut 2 AutoSum マ。 Calibri (Body) 12 - A A- S Wrap Text General O Copy Fill - A H Merge & Center $ % ) +.0 .00 .00 .0 Conditional Format Formatting as Table Cell Styles Paste BIU Insert Delete Format Sort & Format Clear Filter : x v fx G19 P R T V Y AA AB AC AD 2 4 Solution Three Solution Four Unsuitable Production Spolied Inventary Unsuitable Production 6 Spolied Inventory 7 8. 3 Quarter 2 Quarter 1 2 3 Demand Demand 10 Production Production 11 Production (OT) Production (OT) 12 Inventory Inventory 13 14 Inv+Prod+Prod(0OT)-Demand Inv+Prod+Prod(OT)-Demand 15 16 Production Cost Production Cost 17 Production Cost (OT) Production Cost (OT) 18 Inventory Cost Inventory Cost 19 Production Capacity Production Capacity (OT) Production Capacity Production Capacity (OT) 20 21 22 Inventory Capacity Inventory Capacity 23 Production Cost Production Cost (OT) Production Cost 24 25 Production Cost (OT) Inventory Cost Total Cost 26 Inventory Cost Total Cost 27 28 29 tal cost falls/incr As a result of reducing unsuitable production from XX% to XX%, total cost falls/incr Reducing both spoiled inventory (10% -> 5%) and unsuitable production (20% -> 10%) results in a cost reduction/increase of $XXXXXXX. 30 This is greater/smaller than the sum of the cost savings which arise as a result of implementing these initiatives individually. 31 32 33 34 35 36 37 28 Sheet1 + Ready 112% I|