Kool King solution

Kool King solution - Overtime = 0.5 * 5/hr = $2.5/...

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Kool King (A) Analysis 1. Inventory build-up period: September thru March. Artificial demand due to early-order plan. 2. Sales of a/c predominantly April and July. Average Inventory Plant 25169 Field 20650 Total 45819 Inventory carrying cost 45819 * 125.70 * 10% = 550,200 Total Days to make products in fiscal year 1979 = 336 Days available = 230 Three basic options for Kool King a. Second shift b. Overtime c. Second Line Trade-off calculations Hiring cost = $284 / person 100 people = $28400
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Unformatted text preview: Overtime = 0.5 * 5/hr = $2.5/ person/hr 100 persons produce 550 / 8 units /hr. Overtime premium = 2.5*8*100 / 550 = $3.64/ unit 1) Break-even between shifts / overtime = 28,400 / 3.64 = 8,000 (approx) = 3weeks production approx 2) Break-even between overtime and inventory carrying charges = 3.64 *12 / (125.7 *10) = 3.2 months Build an aggregate plan which builds inventory during the lean season and deploys a second shift when demand gets bigger. ....
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