Helter Industries, a company that produces a line of women\'s bathing suits, hir

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 MAY JUNE JULY AUGUST 3,200 2,800 3,100 3,000 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.)

Explanation / Answer

Total cost = 345.6

The complete schedule is given above.

May:

beginning inventory is given as = 403

production required = forecast = beginning inventory = 3200 - 403 = 2797

regular workforce = 12

regular production = 12*205 = 2460

more production required = 2797 - 2460 = 337

temp workforce required = 337/165 = 2.04 = 3 (since we cannot have 2 temp workforce since demand needs to be met)

temp production = 3*165 = 495

total production = 2460 + 495 = 2955

ending inventory = 2955 + 403 - 3200 = 158

inventory cost = ending inventory*24%*unit cost/12 (since 24% of unit cost is yearly cost)

inventory cost = 158*24%*40/12 = 126.4

now beginning inventory for next month June = 158

similarly we can calculate for all other months as shown above in table.

May June July August Forecast 3200 2800 3100 3000 beginning inventory 403 158 148 3 production required 2797 2642 2952 2997 regular workforce 12 12 12 12 Regular production 2460 2460 2460 2460 Temp workforce 3 2 3 4 Temp production 495 330 495 660 Total Production 2955 2790 2955 3120 Ending inventory 158 148 3 123 Inventory cost 126.4 118.4 2.4 98.4

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