Question 4 (25 marks)

Part A

Carlow Manufacturing work 5 days a week and 50 weeks per year. They are moving to kanbans to standardise production. Determine the size of the kanban size required for their sub-assemblies and the number of kanbans needed from the following information:

Setup cost = 30.00

Annual holding cost = 120.00 per sub-assembly

Daily production = 20 sub-assemblies

Annual Usage = 2, 500 sub-assemblies

Lead time = 16 days

Safety stock = 4 days production (10 marks)

Part B

Home Furniture Ltd. Have the following demand estimates:

July	August	September	October	November	December
1,000	1,200	1,400	1,800	1,800	1,800

Assuming stock-outs cost 100 per unit, inventory costs are 25.00 per unit, and starting and ending inventories are zero, evaluate the following scenarios:

Plan A

Produce at a steady rate of 1,000 units per month and subcontract additional units at 60.00 per unit. (3 marks)

Plan B

Vary the workforce to produce the prior months demand. The firm produced 1,300 units in June. The cost of hiring additional workers is 3,000 per 100 units produced. The cost of layoffs is 6,000 per 100 units. (4 marks)

Plan C

Increase the workforce to bring production up to a steady 1,200 units per month. Use overtime to a maximum of 300 units per month. All remaining demand is to be met using a sub-contractor. Overtime cost is 40.00 per unit. (4 marks)

Plan D

Keep the current workforce at a level capable of producing 1,200 units monthly for the months of July to September inclusively. From October increase capacity to 1,800 units and use inventory to absorb additional units. (4 marks)