Question:

Flex, an electronics contract manufacturer, uses its Hayward, CA, facility to produce routers. Consultation with customers has indicated a demand forecast for each category over the next 12 months to be shown in the spreadsheet in the next tab.

Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on the production line. The plant operates 160 hours a month with 4,000 employees. Production of a router takes 15 minutes (0.25 hour) of worker time. Each work is paid $20 per hour, with a 50% premium for any overtime. Overtime is limited to 20 hours per employee per month. The plant currently has 1,000 routers in inventory and want to end the year with the same level of inventory. The cost of holding a router in inventory is $5 per month. The material cost for producing a router is $10.

Question a: Assuming no backlogs, no subcontracting, and no new hires, what is the optimum production schedule? What is the annual cost of this schedule? (40 pts)

Question b: Is there any value of management to negotiate an increase of allowed overtime per employee per month from 20 hours to 40? (10 pts)