The Electric Guitars Corporation is manufacturing electric guitars. There are 20 different models. The sales forecasts...

 

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The Electric Guitars Corporation is manufacturing electric guitars. There are 20 different models. The sales forecasts for the year to come is as follows (in terms of thousand units): Jan. Feb. Mar. Apr. 10 5 10 5 May 10 Jun. Jul. Aug. Sep. Oct. Nov. 60 40 10 80 20 40 Dec. 150 During the ending year, production output was 400,000 units for 11 months (August being the month for vacations). The total headcount remained stable at 700 persons, out of which 400 were production workers. A 10% productivity increase is expected for the coming year. The inventory level is 20,000 units. Besides, the different models of guitars are manufactured by monthly campaign, that is to say that each model is made sequentially in the same job shop once a month. This rule, as one thinks, makes compulsory the existence of a minimum amount of inventory of a half month of sales, at the beginning of each month (except for the beginning of August where 1,5 month are needed). Questions 1) Is the existing headcount enough for fulfilling the sales with no delay ? (graphical answers required). Should we hire additional employees? 2) In order to get a positive answer to question 1), what should have been the starting inventory level? 3) Employees agree to work in August and to take vacations in December. The necessary financial compensation corresponds to an increase of 3% of the wage costs. 4) The average unit cost of final inventory is $500 out of which $100 is for direct labour. Holding costs are 30% of the inventory costs per year. 5) Is the proposed solution worthy compared to question 2)? Is there any other solution in terms of labour management? Should the monthly run be applied all year round for each model? 6) The solution defined in question 2) is chosen by the management. The 20 different models fall out in two categories (sales for each are roughly similar): • low-end guitars with a materials cost of $120 • hi-end guitars with a materials cost of $280 7) Labour costs are the same for both categories. Is the cost structure likely to modify your manufacturing policy? What can be the financial outcome? Explain with a chart. 8) What are the neglected factors in the description of the commercial situation of Electric Guitars Corp.? 9) In which respect do they limit the pertinence of the chosen solution? The Electric Guitars Corporation is manufacturing electric guitars. There are 20 different models. The sales forecasts for the year to come is as follows (in terms of thousand units): Jan. Feb. Mar. Apr. 10 5 10 5 May 10 Jun. Jul. Aug. Sep. Oct. Nov. 60 40 10 80 20 40 Dec. 150 During the ending year, production output was 400,000 units for 11 months (August being the month for vacations). The total headcount remained stable at 700 persons, out of which 400 were production workers. A 10% productivity increase is expected for the coming year. The inventory level is 20,000 units. Besides, the different models of guitars are manufactured by monthly campaign, that is to say that each model is made sequentially in the same job shop once a month. This rule, as one thinks, makes compulsory the existence of a minimum amount of inventory of a half month of sales, at the beginning of each month (except for the beginning of August where 1,5 month are needed). Questions 1) Is the existing headcount enough for fulfilling the sales with no delay ? (graphical answers required). Should we hire additional employees? 2) In order to get a positive answer to question 1), what should have been the starting inventory level? 3) Employees agree to work in August and to take vacations in December. The necessary financial compensation corresponds to an increase of 3% of the wage costs. 4) The average unit cost of final inventory is $500 out of which $100 is for direct labour. Holding costs are 30% of the inventory costs per year. 5) Is the proposed solution worthy compared to question 2)? Is there any other solution in terms of labour management? Should the monthly run be applied all year round for each model? 6) The solution defined in question 2) is chosen by the management. The 20 different models fall out in two categories (sales for each are roughly similar): • low-end guitars with a materials cost of $120 • hi-end guitars with a materials cost of $280 7) Labour costs are the same for both categories. Is the cost structure likely to modify your manufacturing policy? What can be the financial outcome? Explain with a chart. 8) What are the neglected factors in the description of the commercial situation of Electric Guitars Corp.? 9) In which respect do they limit the pertinence of the chosen solution?

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To address the questions lets go step by step Is the existing headcount enough for fulfilling the sales with no delay Should we hire additional employees To determine if the existing headcount is enou... View the full answer