Answer # 1: hiring and firing 120

100

Manual Operation Production Daily Production

Month Demand forecast (hours) days Demand 80
January 1800 21 86
February 1500 19 79 60
March 1900 22 86
April 1600 22 73 40
May 2000 20 100
June 2200 22 100 20
July 2000 22 91
August 1800 21 86 0
September 1700 21 81
October 1800 22 82
November 2000 20 100
December 1500 22 68 Production Demand
21800 254 1031
Cost Information:
Production = expected demand Inventory carrying cost= $ 1.5 per unit per month
Subcontracting cost per unit: 0
Average Pay rate: 30 per hr (8*30=240 per day)
Overtime Pay rate: 25% on two hr Sunday and four hrSatday
Labor Hours to produce a unit: 1.12 (12wrkrs*8hr/day)/86unit/day)
Cost of hiring: 500 per employee
Cost of layoffs: 5080.00
inventory in hand= 1000 units
 basic production
cost(demand x 1.12 Extra cost of decreasing Total Cost
hiring Layout Cost
Manual Operation Production Daily Production hr/unit x 30/per hr.
Month Demand forecast (hours) days Demand
January 1800 21 86 2880 2880
February 1500 19 79 2652.63157894737 34375.9398 37028.571
March 1900 22 86 2901.81818181818 3708.13397 6609.9522
April 1600 22 73 2443.63636363636 69272.7273 71716.364
May 2000 20 100 3360 13636.3636 16996.364
June 2200 22 100 3360 3360
July 2000 22 91 3054.54545454546 46181.8182 49236.364
August 1800 21 86 2880 26389.6104 29269.61
September 1700 21 81 2720 36000 38720
October 1800 22 82 2755.2 523.809524 3279.0095
November 2000 20 100 3360 9000 12360
December 1500 22 68 2290.90909090909 161636.364 163927.27
34658.7406698565 26868.3071 373856.459 435383.51

Total cost 435,383.51

 120
Answer # 2: Using 10 workers

average forecast
100

Manual Operatiion Production Daily Production 80

Month Demand forecast (hours) days Demand
January 1800 21 86
60
February 1500 19 79
March 1900 22 86
40
April 1600 22 73
May 2000 20 100
20
June 2200 22 100
July 2000 22 91
0
August 1800 21 86
September 1700 21 81
October 1800 22 82
November 2000 20 100
December 1500 22 68 Production Demand
21800 254 1031
Cost Information:
Avg Requirement = Total Expected Demand Inventory carrying cost= $ 1.5 per unit per month
# of Production days Subcontracting cost per unit: 0
Average Pay rate: 30 per hr (8*30=240 per day)
Avg Requirement = 21800 Overtime Pay rate: 25% on two hr Sunday and four hrSatday
254 Labor Hours to produce a unit: 1.12 (12wrkrs*8hr/day)/86unit/day)
Cost of hiring: 500 per employee
Avg Requirement = 85.8267716535 = 86units Cost of layoffs: 5080.00
inventory in hand= 1000 units
 Manual
Production Operatiion
@86 units per Demand forecast Monthly Inventory Ending
Month Production days day (hours) change Inventory
January 21 1806 1800 6 1006 Total units carried overfrom one
February 19 1634 1500 134 1140 month to another: 11612
March 22 1892 1900 -8 1132
April 22 1892 1600 292 1424 work force available= 10 workers
May 20 1720 2000 -280 1144
June 22 1892 2200 -308 836
July 22 1892 2000 -108 728
August 21 1806 1800 6 734 1.12*unt= 10 workers
September 21 1806 1700 106 840 8
October 22 1892 1800 92 932 so,
November 20 1720 2000 -280 652 units produced= 71.428571
December 22 1892 1500 392 1044 units required= 15
254 21844 11612 labor Hr required= 16.8
working saturdays= 4.2
costs Calculations
Inventory carrying 17418 (=11612 units are carried * 1.5 per unit)
Regular time labor 609600 (=10 workers * 240 per day * 254 days)
layoff cost 10160 (= 2 workers lay off* 5080 monthly salary)
overtime cost 6350 (=5 saturdays*25% premium*5080)
Total cost 643,528.00
Answer # 3: using full capacity 450
400

capacity
full production
350
Automatic Operation Production Daily Production
Month Demand forecast (hours) days Demand 300
January 6000 21 286 250
February 4000 19 211
200
March 5000 22 227
April 6000 22 273 150
May 5000 20 250 100
June 6000 22 273
50
July 7000 22 318
August 6000 21 286 0
ry ry ch ril ay ne Ju
ly us
t
be
r
be
r
be
r
be
r
September 5000 21 238 ua ua ar Ap M Ju g o
Ja
n b r M Au ptem Oct ve
m
ce
m
October 6000 22 273 Fe Se No De
November 8000 20 400
December 6000 22 273 Production Demand
70000 254 3306
Cost Information:
Full Production capacity= 360 (=45 units per hr Inventory carrying cost= $ 1.5 per unit per month
daily *8 hr per day) Subcontracting cost per unit: 0
Average Pay rate: 20 per hr (8*20=160 per day)
Overtime Pay rate: 25% on two hr Sunday and four hrSatday
Labor Hours to produce a unit: 0.11 (5wrkrs*8hr/day)/360unit/day)
Cost of hiring: 500 per employee
Cost of layoffs: 3386.67
inventory in hand= 1000 units
work force available= 5 workers
 Automatic
Production Operation
@360 units per Demand forecast Monthly Inventory Ending
Month Production days day (hours) change Inventory
January 21 7560 6000 1560 2560 Total units carried over from one
February 19 6840 4000 2840 5400 month to another: 169120
March 22 7920 5000 2920 8320
April 22 7920 6000 1920 10240
May 20 7200 5000 2200 12440
June 22 7920 6000 1920 14360
July 22 7920 7000 920 15280
August 21 7560 6000 1560 16840
September 21 7560 5000 2560 19400
October 22 7920 6000 1920 21320
November 20 7200 8000 -800 20520
December 22 7920 6000 1920 22440
254 91440 169120

costs Calculations
Inventory carrying 253680 (=169120 units are carried * 1.5 per unit)
Regular time labor 203200 (=5 workers * 160 per day * 254 days)

Total cost 456,880.00

Answer # 4: using fulfilling demand in peak periods by over time 450
400

prodution requirement
350
Automatic Operation Production Daily Production
Month Demand forecast (hours) days Demand 300
January 6000 21 286 250
February 4000 19 211
200
March 5000 22 227
April 6000 22 273 150
May 5000 20 250 100
June 6000 22 273
50
July 7000 22 318
August 6000 21 286 0
ry ry ch ril ay ne Ju
ly us
t
be
r
be
r
be
r
be
r
September 5000 21 238 ua ua ar Ap M Ju g o
Ja
n br M Au em Oct ve
m
ce
m
Fe pt De
October 6000 22 273 Se No
November 8000 20 400
December 6000 22 273 Production Demand
70000 254 3306
Cost Information:
Avg Requirement = Total Expected Demand Inventory carrying cost= $ 1.5 per unit per month
# of Production days Subcontracting cost per unit: 0
Average Pay rate: 20 per hr (8*20=160 per day)
Avg Requirement = 70000 Overtime Pay rate: 25% on two hr Sunday and four hrSatday
254 Labor Hours to produce a unit: 0.11 (5wrkrs*8hr/day)/360unit/day)
Cost of hiring: 500 per employee
Avg Requirement = 275.590551181 = 276 units Cost of layoffs: 3386.67
inventory in hand= 1000 units
work force required= 3 workers
 Automatic
Production Operation
@276 units per Demand forecast Monthly Inventory Ending
Month Production days day (hours) change Inventory
January 21 5796 6000 -204 796 Total units carried over from one
February 19 5244 4000 1244 2040 month to another: 31192
March 22 6072 5000 1072 3112
April 22 6072 6000 72 3184 work force required= 3 workers
May 20 5520 5000 520 3704
June 22 6072 6000 72 3776
July 22 6072 7000 -928 2848
August 21 5796 6000 -204 2644 units = (3 workers * 8 hrs shift)
September 21 5796 5000 796 3440 labor hrs to produce a unit
October 22 6072 6000 72 3512 so,
November 20 5520 8000 -2480 1032 units produced= 218.18182
December 22 6072 6000 72 1104 units required= 275.59055
254 70104 31192 units left= 57.408733
Extra hours 6.27
costs Calculations required =
Inventory carrying 46788 (=31192 units are carried * 1.5 per unit)
Regular time labor 121920 (=3 workers * 160 per day * 254 days)
layoff cost 6773.33 (= 2 workers lay off* 3387 monthly salary)
overtime cost 1693.33 (=2 saturdays*25% premium*3387)
Total cost 177,174.67