You are the operations manager for an OEM manufacturing plant that produces YBOX
ID: 2474450 • Letter: Y
Question
You are the operations manager for an OEM manufacturing plant that produces YBOX game consoles.
Based on the sales record from 2010, the marketing manager forecasts the demand for January-June of 2011 as the following:
January
February
March
April
May
June
2,500
3,000
4,000
3,500
3,500
3,000
Relevant information includes:
Production Time
1 hour per unit
Average labor cost
$10 per hour
Workweek
5 days, 8 hours per day
Days per month
20 work days per month
Beginning inventory
500 units
Safety stock
One-half month
Shortage cost
$20 per unit per month
Carrying cost
$5 per unit per month
As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages.
Demand not met is carried over to the following month. You currently have 21 workers.
a. Which aggregate plan will you use to produce the forecasted demand for YBOX game consoles?
Level stategy
b. What is the total cost for the chosen plan?
Given
Time Period
January
February
March
April
May
June
Demand Forecast
Number of Working Days per Month
Costs
Materials
XXX
$ per unit
Inventory holding cost
$5.00
$ per unit per month
Shortage costs
$20.00
$ per unit per month
Hiring and training cost
$0.00
$ per worker
Layoff cost
$0.00
$ per worker
Production time
1.0
hrs per unit
Straight time labor cost
$10.00
$ per hour
Overtime labor cost
$0.00
$ per hour
Working time (hrs/day)
8.00
hrs per day
Beginning inventory
500
units
Aggregate Production Planning Requirements (??% Safety Stock)
Time Period
January
February
March
April
May
June
Beginning Inventory
Demand Forecast
Safety Stock (% x Demand forecast)
Production Requirement (Demand forecast + Safety stock - Beginning inventory)
Ending Inventory (Beginning inventory + Production requirement - Demand forecast)
Time Period
January
February
March
April
May
June
Total
Beginning Inventory
Working Days per month
Production Hours Available (Working days per month x hrs/day x # of workers) ?? workers*
Actual Production (Production hrs available / Labor hrs required per unit)
Demand forecast
Ending Inventory (Beginning inventory + Actual production - Demand forecast)
Units Short (Absolute value of a negative ending inventory)
Shortage Cost (Units short x Cost of stockout)
Safety Stock
Units Excess (Ending inventory - Safety stock) only if positive amount
Inventory Cost (Units excess x Inventory holding cost)
Straight Time Cost (Production hrs available x Straight time labor cost)
*(Sum of Production Requirement in Page 1 x 1 hr./unit)/(Sum of Production Hours Available x 8 hr./day) = (20,500 x 1)/(120 x 8) = 21
Total Cost
You are the operations manager for an OEM manufacturing plant that produces YBOX game consoles.
Based on the sales record from 2010, the marketing manager forecasts the demand for January-June of 2011 as the following:
January
February
March
April
May
June
2,500
3,000
4,000
3,500
3,500
3,000
Relevant information includes:
Production Time
1 hour per unit
Average labor cost
$10 per hour
Workweek
5 days, 8 hours per day
Days per month
20 work days per month
Beginning inventory
500 units
Safety stock
One-half month
Shortage cost
$20 per unit per month
Carrying cost
$5 per unit per month
As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages.
Demand not met is carried over to the following month. You currently have 21 workers.
a. Which aggregate plan will you use to produce the forecasted demand for YBOX game consoles?
Level stategy
b. What is the total cost for the chosen plan?
Given
Time Period
January
February
March
April
May
June
Demand Forecast
Number of Working Days per Month
Costs
Materials
XXX
$ per unit
Inventory holding cost
$5.00
$ per unit per month
Shortage costs
$20.00
$ per unit per month
Hiring and training cost
$0.00
$ per worker
Layoff cost
$0.00
$ per worker
Production time
1.0
hrs per unit
Straight time labor cost
$10.00
$ per hour
Overtime labor cost
$0.00
$ per hour
Working time (hrs/day)
8.00
hrs per day
Beginning inventory
500
units
Aggregate Production Planning Requirements (??% Safety Stock)
Time Period
January
February
March
April
May
June
Beginning Inventory
Demand Forecast
Safety Stock (% x Demand forecast)
Production Requirement (Demand forecast + Safety stock - Beginning inventory)
Ending Inventory (Beginning inventory + Production requirement - Demand forecast)
Time Period
January
February
March
April
May
June
Total
Beginning Inventory
Working Days per month
Production Hours Available (Working days per month x hrs/day x # of workers) ?? workers*
Actual Production (Production hrs available / Labor hrs required per unit)
Demand forecast
Ending Inventory (Beginning inventory + Actual production - Demand forecast)
Units Short (Absolute value of a negative ending inventory)
Shortage Cost (Units short x Cost of stockout)
Safety Stock
Units Excess (Ending inventory - Safety stock) only if positive amount
Inventory Cost (Units excess x Inventory holding cost)
Straight Time Cost (Production hrs available x Straight time labor cost)
*(Sum of Production Requirement in Page 1 x 1 hr./unit)/(Sum of Production Hours Available x 8 hr./day) = (20,500 x 1)/(120 x 8) = 21
Total Cost
Explanation / Answer
Number of hours per day 8 Days of the month 20 Labor cost $10 Number of Labor 21 Beginning inventory (units) 500 Safety Stock for the month 1000 Cost of Excess per unit $5 Cost of shortage per unit $20 Month 500 Present production capacity with 21 labors Cost of production cumulative demand + safety stock Cumulative capacity + inventory Inventory Excess Inventory Shortage cost of Inventory Excess cost of Inventory Shortage Cost of carring safety stoch per month Jan 2500 3360 $33,600 3500 3860 360 1800 $5,000 Feb 3000 3360 $33,600 6500 7220 720 3600 $5,000 Mar 4000 3360 $33,600 10500 10580 80 400 $5,000 Apr 3500 3360 $33,600 14000 13940 0 -60 1200 $5,000 May 3500 3360 $33,600 17500 17300 0 -200 4000 $5,000 Jun 3000 3360 $33,600 20500 20660 160 800 $5,000 Total $201,600 6600 5200 $30,000 Total Cost of the plan $243,400
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