ch13 - Chapter 13 Revision to Problem 1 Add under Holding...

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Chapter 13 Revision to Problem 1: Add under Holding costs Regular Labor Cost: \$2,016,000 Total Cost = \$2,113,600 Problem 2: a. Production rate per period = 6080 units. b. 228 employees c.. Period 1 2 3 4 5 6 Total Demand (units) 5600 4800 7840 5200 6560 3600 33600 Cumulative Demand 5600 10400 18240 23440 30000 33600 Cumulative Demand/ 5600 5200 6080 5835 6000 5600 # of periods Period Production 6080 6080 6080 6080 6080 6080 36480 Cumulative Production 6080 12160 18240 24320 30400 36480 Ending Inventory 480 1760 0 880 400 2880 6400 d. Total Cost = Regular-time labor cost + Carrying cost + Hiring Cost Total cost = (\$10.00 per hour x 160 hours per period x 6 periods x 228 employees) + (6400 units x \$10 per unit) + (18 employees x \$600 per employee) = \$2,263,600. e. The cost of this plan is \$150,000 higher than a level aggregate plan using inventories and back orders. Under this plan, 45% of the inventory holding cost is incurred in period 6. However, in terms of customer service, this plan has a high degree of customer service since no orders are placed on back order. Also, under this plan the inventory and hiring costs are also considerably higher than a level aggregate plan using inventories and backorders. Revision to Problem 3: Place under Firing cost: Regular Labor Cost: \$2,016,000 Total Cost: \$2,223,000 In the first line under total cost: “While customer demand is met, the costs of the chase plan with hiring and firing is more than \$109,000 over the ………. Remove double

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Problem 4: a. Period 1 2 3 4 5 6 Total Demand 5600 4800 7840 5200 6560 3600 34000 Employees 210 180 294 195 246 135 1260 Hires 0 114 51 165 Fires 30 99 111 240 b. Total cost = Hiring Cost + Firing Cost + Regular-time labor Cost Total Cost = (165 x \$600) + (240 x \$450) + (\$10 per hour x 160 hours per period x 1260 employees) = \$2,223,000. c. This plan yields no inventory carrying cost since it produces exactly what is needed. The total costs were lower than the level aggregate plan in problem 2. Moreover, customer service is high since no backorders are needed. However, from a planning perspective this plan would be difficult to implement due to the high variability of resources needed each period. Moreover, employee morale would tend to be fairly low with such a plan due to lack of job security. Revision to Problem 5: Place in part e: Regular Labor Cost: \$2,016,000 Total Cost: \$2,304,000 In place of almost three times the level plan , change to \$81,000 over the costs of the hiring and firing plan in problem 3.
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