Or1000mo prodemp eachemployeeproduces8unitspermonth

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: mployee idle for a month Cost is one month salary: $20/hr × 8hr/day × 20day/month = $3200/month – One employee idle for an hour $20/hour – One employee idle for the production of one unit Cost is: 20hr/unit × $20/hr = $400/unit Inventory cost : $125/unit/mo. or $1,000/mo/ prod./emp. – Each employee produces 8 units per month : (8hr/day × 20day/month)/20 hr/unit = 8 unit/mo./emp. 20day/month)/20 hr/unit = 8 unit/mo./emp. 125 × 8 = $1000 8 = $1000 Firing and Hiring: $1,250 ($1,250 ­ $3,200/mo./emp.) – F+H = $500/emp. +$750/emp. = $1250/emp. – One month Salary is $3200/mo./emp. – Firing means saving one month salary, thus one way to look at F and H Cost is: ($1,250 ­ $3,200/mo./emp.) Hiring and Firing: $1,250 ($1,250 + $3,200/mo./emp.) – Hiring means paying one month salary as well, which is an additional $3200/month Overtime cost : $600/unit – 20hr/unit × $30/hr = $600/unit Sub­contracting cost : $650/unit Backlog cost : $250/unit/mo. or $2,000/month’s production/emp. – Each employee produces 8 units per month 8 unit/emp. × $250/unit/mo. = = $2000/mo. Prod./emp. PREFERENCE THRESHOLDS : PREFERENCE THRESHOLDS : COMPARING BETWEEN TWO OPTIONS Idle Time Versus Inventory Building Idle cost: $3,200/month Inventory cost: $1,000/month’s production – The cost of one employee building inventory for one month is $125 × 8 = $1000 8 = $1000 – the cost of one employee building inventory for two months is $125× 8× ( 1 + 2) = $1000× ( 1 + 2); (1 2) = $1000 (1 2); – the cost of one employee building inventory for n months is $125× 8× (1 + 2 + ... + n) = $1000× (1 + 2+...+ n); 2 + ... + n) = $1000 – for idle time to be preferable, the number n of months we have one employee working to build it has to be such that $3200 × n ≤ $1000 × ( 1 + 2 + ... + n) n 2 + ... + n) Idle Time Versus Inventory Building Idle Time Cost Salary = $3,200/mo./emp. Inv. Cost = $1,000/month’s prod./emp. # months 1 2 3 4 5 6 Idle cost $3,200 $6,400 $9,600 $12,800 $16,000 $19,200* Inventory cost $1,000* $3,000* $6,000* $10,000* $15,000* $21,000 Idle time is preferable if an employee has to build up inventory for more than 5 months Idle Time...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern