Helter Industries, a company that produces a line of women\'s bathing suits, hir
ID: 349991 • Letter: H
Question
Helter Industries, a company that produces a line of women's bathing suits, hires temporaries to help produce its summer product demand. For the current four-month rolling schedule, there are 12 full-time employees on staff. Temps can be hired when needed and can be used as needed on a month-by-month basis, whereas the full-time employees must be paid whether they are needed or not. Each full-time employee can produce 205 suits, while each temporary employee can produce 165 suits per month.
Demand for bathing suits for the next four months is as follows:
Beginning inventory in May is 403 complete (a complete two-piece includes both top and bottom) bathing suits. Bathing suits cost $40 to produce and carrying cost is 24 percent per year.
Develop an aggregate plan that uses the 12 full-time employees each month and a minimum number of temporary employees. Assume that all employees will produce at their full potential each month. Calculate the inventory carrying cost associated with your plan using planned end of month levels. (Round "Inventory cost" to 2 decimal places.)
MAY JUNE JULY AUGUST 3,200 2,800 3,100 3,000
Explanation / Answer
Number of full time employees = 12
Beginning inventory in the month of May = 403
Forecast for the month of may = 3200
Production capacity for a full-time employee per month = 205
Production capacity for a temporary employee per month = 165
Cost per bathing suit = $40
Carrying cost = 24% per annum per bathing suit , i.e. 2% per month
= $ 0.80 per month per bathing suit
As all the employees produce at their full potential per month, every employee will produce to their full capacity.
Forecast for the month of May = 3200
Beginning inventory = 403
Production required = Total production for that month - beginning inventory
= 3200 - 403 = 2797
Regular workforce = 12 workers
Regular production = 12 * 205 = 2460
Temporary workers required = (2797 - 2460)/ 165 = 2.042
Hence we require more than 2 workers. Thus temporary workers = 3
Temp production = 165*3 = 495
Total production = Regular production + Temporary production
= 2460 + 495 = 2955
Ending inventory = Beginning inventory + Total production
= 403 + 2955 = 3358
Inventory cost = Carrying cost of beginning inventory for the month + average carrying cost for the suits produced during the month
= Begining inventory * Carrying cost per month + Total production * (Carrying cost per month)/2
= 403 * 0.8 + 2955 * 0.4
= 322.4 + 1182 = $ 1504.4
Forecast for the month of June = 2800
Beginning inventory for June = Ending inventory of May - Sales of May
= 3358 - 3200 = 158
Production required = Total production for that month - beginning inventory
= 2800 - 158 = 2642
Regular workforce = 12 workers
Regular production = 12 * 205 = 2460
Temporary workers required = (2642 - 2460)/ 165 = 1.10
Hence we require more than 1 worker. Thus temporary workers = 2
Temp production = 165*2 = 330
Total production = Regular production + Temporary production
= 2460 + 330 = 2790
Ending inventory = Beginning inventory + Total production
= 158 + 2790 = 2948
Inventory cost = Carrying cost of beginning inventory for the month + average carrying cost for the suits produced during the month
= Begining inventory * Carrying cost per month + Total production * (Carrying cost per month)/2
= 158 * 0.8 + 2790 * 0.4
= 126.4 + 1116 = $ 1242.4
Forecast for the month of July = 3100
Beginning inventory for July = Ending inventory of June - Sales of June
= 2948 - 2800 = 148
Production required = Total production for that month - beginning inventory
= 3100 - 148 = 2952
Regular workforce = 12 workers
Regular production = 12 * 205 = 2460
Temporary workers required = (2952 - 2460)/ 165 = 2.98
Hence we require more than 2 workers. Thus temporary workers = 3
Temp production = 165*3 = 495
Total production = Regular production + Temporary production
= 2460 + 495 = 2955
Ending inventory = Beginning inventory + Total production
= 148 + 2955 = 3103
Inventory cost = Carrying cost of beginning inventory for the month + average carrying cost for the suits produced during the month
= Begining inventory * Carrying cost per month + Total production * (Carrying cost per month)/2
= 148 * 0.8 + 2955 * 0.4
= 118.4 + 1182 = $ 1300.4
Forecast for the month of August = 3000
Beginning inventory for August = Ending inventory of July - Sales of July
= 3103 - 3100 = 3
Production required = Total production for that month - beginning inventory
= 3000 - 3 = 2997
Regular workforce = 12 workers
Regular production = 12 * 205 = 2460
Temporary workers required = (2997 - 2460)/ 165 = 3.254
Hence we require more than 3 workers. Thus temporary workers = 4
Temp production = 165*4 = 660
Total production = Regular production + Temporary production
= 2460 + 660 = 3120
Ending inventory = Beginning inventory + Total production
= 3 + 3120 = 3123
Inventory cost = Carrying cost of beginning inventory for the month + average carrying cost for the suits produced during the month
= Begining inventory * Carrying cost per month + Total production * (Carrying cost per month)/2
= 3 * 0.8 + 3120 * 0.4
= 2.4 + 1248 = $ 1250.4
Total carrying cost for all months = 1504.4 + 1242.4 + 1300.4 + 1250.4
= $ 5297.6
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