1 Use the data provided below, develop a hybrid plan using a permanent workforce of 195 employees...
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1 Use the data provided below, develop a hybrid plan using a permanent workforce of 195 employees supplemented by subcontracting. If demand exceeds regular-time production plus subcontracting plus inventory, the company will use backorders. Calculate the cost of this plan. C ostD ata Regulartim e laborcostperhour $10.00 O vertim e laborcostperhour $15.00 Subcontracting costperunit(laboronly) $84.00 Back ordercostperunitperperiod $20.00 Inventory holding costperunitperperiod $10.00 Hiring costperem ployee $600.00 Firing costperem ployee $450.00
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Transcript of 1 Use the data provided below, develop a hybrid plan using a permanent workforce of 195 employees...
1
Use the data provided below, develop a hybrid plan using a permanent workforce of 195 employees supplemented by subcontracting. If demand exceeds regular-time production plus subcontracting plus inventory, the company will use backorders. Calculate the cost of this plan.
Cost DataRegular time labor cost per hour $10.00
Overtime labor cost per hour $15.00Subcontracting cost per unit (labor only) $84.00
Back order cost per unit per period $20.00Inventory holding cost per unit per period $10.00
Hiring cost per employee $600.00Firing cost per employee $450.00
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Capacity DataBeginning workforce (employees) 210
Beginning inventory (units) 400Production standard per unit (hours) 6
Regular time available per period (hours) 160Overtime available per period (hours) 32Subcontracting maximum per period 1000Subcontracting minimum per period 500
Demand Data (units)Period 1 6000Period 2 4800Period 3 7840Period 4 5200Period 5 6560Period 6 3600
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory)Subcontracting
Ending InventoryBackorder
We calculate the regular-time production rate using a permanent workforce of 195 employees.
Regular-time available per period = 160 hoursNumber of employees = 195Production standard per unit = 6 hoursTherefore, regular-time production per period = (195 x 160) / 6 = 5200 units
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600Subcontracting 500
Ending Inventory 100Backorder
We show the plan computation period by period.
inventory. ending asleft be willunits 100 Therefore,
ting.subcontrac in required is units 500 of minimum A
ting.subcontracby met is shortage The
units. 400 5200 - 5600 of shortagea have will we1, period in units 5200 produce weSince
units. 5600 400 - 6000 Inventory DemanddemandNet 0 period1 period1 period
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700Subcontracting 500
Ending Inventory 100 500Backorder
We show the plan computation period by period.
inventory. ending asleft units 500 4700 - 5200
have will we2, period in units 5200 produce weSince
units. 4700 100 - 4800 Inventory DemanddemandNet 1 period2 period2 period
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340Subcontracting 500 1000
Ending Inventory 100 500Backorder 1140
We show the plan computation period by period.
.backorders as units 1140 1000 - 2140 leave will weTherefore,
ting.subcontrac in allowed is units 1000 of maximum A
ting.subcontracby met is shortage The
units. 2140 5200 - 7340 of shortagea have will we3, period in units 5200 produce weSince
units. 7340 500 - 7840 inventory DemanddemandNet 2 period3 period3 period
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340Subcontracting 500 1000 1000
Ending Inventory 100 500Backorder 1140 140
We show the plan computation period by period.
.backorders as units 140 1000-1140 leave will weTherefore,
ting.subcontrac in allowed is units 1000 of maximum A
ting.subcontracby met is shortage The
units. 1140 5200 - 6340 of shortagea have will we4, period in units 5200 produce weSince
units. 6340 1140 5200 BackorderDemanddemandNet 3 period4 period4 period
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700Subcontracting 500 1000 1000 1000
Ending Inventory 100 500Backorder 1140 140 500
We show the plan computation period by period.
.backorders as units 5001000-1500 leave will weTherefore,
ting.subcontrac in allowed is units 1000 of maximum A
ting.subcontracby met is shortage The
units. 1500 5200 - 6700 of shortagea have will we5, period in units 5200 produce weSince
units. 6700 140 6560 BackorderDemanddemandNet 4 period5 period5 period
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1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
We show the plan computation period by period.
inventory. ending asleft units 1100 4100 - 5200
have will we6, period in units 5200 produce weSince
units. 4100 500 3600 BackorderDemanddemandNet 5 period6 period6 period
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Cost CalculationsRegular time labor cost $1,872,000
We compute the plan’s costs.
Regular time labor cost= regular labor cost per hour x total units of regular time production x labor standard per unit= $10 x (5200 x 6) x 6= $ 1872000
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
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Cost CalculationsRegular time labor cost $1,872,000Subcontracting cost $294,000
We compute the plan’s costs.
Subcontracting cost= Total units of subcontracting x subcontracting cost per unit= (500 + 1000 + 1000 + 1000) x $84= $ 294000
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
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Cost CalculationsRegular time labor cost $1,872,000
Subcontracting cost $294,000Inventory holding cost $17,000
We compute the plan’s costs.
Inventory holding cost= Total units of ending inventory x holding cost per unit per period= (100 + 500 +1100) x $10= $ 17000
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
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Cost CalculationsRegular time labor cost $1,872,000
Subcontracting cost $294,000Inventory holding cost $17,000
Back order cost $35,600
We compute the plan’s costs.
Backorder cost= Total units of backorder x Backorder cost per unit per period= (1140 + 140 + 500) x $20= $ 35600
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
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Cost CalculationsRegular time labor cost $1,872,000
Subcontracting cost $294,000Inventory holding cost $17,000
Back order cost $35,600Firing cost $6,750
We compute the plan’s costs.
Firing cost= (Beginning workforce – Current workforce) x Firing cost per employee= (210 - 195) x $450= $ 6750
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
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Cost CalculationsRegular time labor cost $1,872,000
Subcontracting cost $294,000Inventory holding cost $17,000
Back order cost $35,600Firing cost $6,750Total Cost $2,225,350
We compute the plan’s costs.
Total plan cost= Regular time labor + Subcontracting + Holding + Backorder + Firing= 1872000 + 294000 + 17000 + 35600 + 6750= $ 2225350
1 2 3 4 5 6Beginning Inventory 400
Demand 6000 4800 7840 5200 6560 3600Regular Time Production 5200 5200 5200 5200 5200 5200
Net Demand (demand + backorder - inventory) 5600 4700 7340 6340 6700 4100Subcontracting 500 1000 1000 1000
Ending Inventory 100 500 1100Backorder 1140 140 500
