Question: I only need help with table 3 and below. The rest has been filled in. Thank you. A prominent window manufacturer in Western Pennsylvania is

I only need help with table 3 and below. The rest has been filled in. Thank you.

A prominent window manufacturer in Western Pennsylvania is debating in its senior management meetings how to handle their labor force. The demand for their windows has increased and they are planning the workforce for 2021. Table 1 is their relevant costs:

TABLE 1

INVENTORY CARRYING COST

$5 per unit per month

SUBCONTRACTING COST (per unit)

$45 per unit

AVERAGE PAY RATE (per hour / per 8-hour day)

$10 per hour / $80 per day

OVERTIME PAY RATE (every hour >8 in a day)

$15 per hour (above 8 hours per day)

LABOR HOURS TO PRODUCE A WINDOW

4 hours per unit

COST OF INCREASING DAILY PRODUCTION RATE (recruiting, hiring, and training)

$400

COST OF DECREASING DAILY PRODUCTION RATE (unemployment for layoffs)

$600

Table 2 is their production, demand, and inventory data (most people do not want windows installed in the coldest months of the years but demand for good windows increases in late spring before the summer heat):

TABLE 2

MONTH

PRODUCTION DAYS

PRODUCTION @ 100 UNITS/DAY

DEMAND FORECAST

MONTHLY INVENTORY CHANGE

ENDING INVENTORY

January

20

2000

400

1600

1600

February

20

2000

800

1200

2800

March

23

2300

2000

300

3100

April

22

2200

2800

-600

2500

May

22

2200

4000

-1800

700

June

22

2200

2900

-700

0

  1. Tell me the total number of production days: 129
  2. Tell me the total units of inventory carried over from month to month and the total ending inventory: 10700
  3. Tell me the workforce needed to produce the required units per day and why: 50
  4. Complete Table 3:

TABLE 3

COSTS

CALCULATIONS

Inventory Carrying

Regular Time Labor

Other Costs

TOTAL COST

  1. What month is the minimum monthly demand on which the constant workforce is established?
  2. What is the amount of production that can be made IN-HOUSE over this 6-month period?
  3. What is the amount of production that must be SUBCONTRACTED over this 6-month period?
  4. Which method is most cost-efficient keep all production in-house with a constant workforce or subcontract the expensive amounts during peak period?
  5. What factors might impact the companys decision to go one way or the other? What happens if the subcontractor drops his costs $5 to $40?

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