3. The Good and Rich Candy Company makes a variety of candies in three factories

Question

3. The Good and Rich Candy Company makes a variety of candies in three factories worldwide. Its line of chocolate candies exhibits a highly seasonal demand pattern with peaks during the winter months (for the holiday season and Valentine's Day) and valleys during the summer months (when chocolate tends to melt and customers are watching their weight) Quarter Spring Summer Fall Winter Forecast Sales (lb) 80,000 50,000 120,000 150,000 Given the following costs and quarterly sales forecasts, determine whether level production strategy or chase production strategy would more economically meet the demand for chocolate. (Use Hiring Cost- $100 per worker, Firing Cost-$500, Inventory carrying cost - $0.50 per pound per quarter, Regular production cost per pound- $2.00, Production per employee 1,000 pounds per quarter, Beginning Workforce - 100 workers) Formulate a linear programming model for the problem above that will satisfy demand for Good and Rich chocolate candies at minimum cost. Solve the model with Excel Solver. Compare the solution with Chase and Level strategies you obtained. Submit the model with sensitivity reports into Canvas and write down your assessments. 4.

Explanation / Answer

Answer:

given data:

here we need to find out the:

1.level protction strategy:

Level Production Strategy: This strategy involves averageing out the production.

Average Production in all four quarters: (80000 + 50000 + 120000 + 150000)/4

=100000 units.

Since each worker can produce 1000 pounds per quarter hence to produce 1,00,000 pounds we will require

: 1,00,000/1000 = 100 workers

Since we already have 100 workers hence no hiring and firing costs would be incurred.

Let us compute production and inventory costs:

Hence total costs incurred is production of 400,000 pounds at the rate of $2 and holding inventory of 140,000 @0.5

= 400,000 * $2 + 140,000 * $0.5

=$870,000

2)Chase demand Strategy:

Here any additional workers apart from what is required to fulffill the demand are fired and if there is a shortfall then hiring is done.

Hence total cost in this strategy is :

400,000 * $2 + 100 * $100 + 50 *$500

= $835000

Since the second strategy yeilds less cost hence it shall be adopted.

Notes: a)Inventory Computation in Level Production Strategy:

Spring : Production - Forecast = 100000- 80000 = 20000

Summer : 100000-50000 = 50000; Total inventory = opening inventory + current

:20000 + 50000 = 70000

Fall : Since here production is less than demand hence opening stock is utilised.

100000 - 120000 = (20000)

Closing stock = 70000 - 20000 = 50000

Winter : 100000 - 150000= (50000)

Closing stock = 50000 - 50000 = 0

2.Chase demand strategy:

Workers required column is computed by : Production / 1000 ( since each worker produces 1000 pound)

Workers Fired Column : It is computed by comparing workers required column and existing workers. Excess are fired.

Spring : 100 - 80 = 20.

Closing number of workers = 80

Summer : 80 -50 = 30

Closing number of worker : 50

Workers Hired :

Fall : 120 - 50 = 70

Closing number of workers : 120

Winter : 150 -120 : 30

quater forcast sales(ib) spring 80,000 summer 50,000 fall 120,000 winter 150,000

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