FansForYou is a small, privately owned company that manufactures fans. Large var
ID: 367129 • Letter: F
Question
FansForYou is a small, privately owned company that manufactures fans. Large variations in demand due to seasonality have contributed to high costs for the company. FansForYou currently uses a level production stratefy because it prefers not to hire and fire employees. However, if there is enough cost justification, the company will consider alternative production plans.
MONTH
DEMAND
September
1500
October
1000
November
600
December
600
January
600
February
800
March
1000
April
1000
May
4000
June
6500
July
6000
August
4000
Beginning inventory
0
Beginning workforce
25 workers
Production rate
100 fans per worker per month
Regular production cost
$40 per fan
Overtime production cost
$60 per fan
Subcontracting cost
$70 per fan
Overtime capacity
Not to exceed regular production
Subcontracting capacity
Unlimited
Holding cost
$8 per fan
Hiring cost
$2000
Firing cost
$3000
What is the cost of the current production plan?
MONTH
DEMAND
September
1500
October
1000
November
600
December
600
January
600
February
800
March
1000
April
1000
May
4000
June
6500
July
6000
August
4000
Explanation / Answer
Cost of the current production plan
Beginning workforce: 25 workers
Beginning Inventory: 0
Subcontracting capacity: Unlimited
Overtime capacity: Regular Production
Production rate per worker: 100 units/month
Regular wage rate: $40 per unit
Overtime wage rate: $60 per unit
Subcontracting cost: $70 per unit
Hiring cost: $2000 per worker
Firing cost: $3000 per worker
Holding cost: $8 per unit/month
Input: Beg. Wkrs 25
Regular $40
Hiring $2,000
Units/wkr 100
Overtime $60
Firing $3,000
Beg. Inv. 0
Subk $70
Inventory $8
Level Production
Month Demand Reg OT Subk Inv Wkrs Hired Fired
Sep 1500 2,300 0 0 800 23 0 2
Oct 1000 2,300 0 0 2,100 23 0 0
Nov 600 2,300 0 0 3,800 23 0 0
Dec 600 2,300 0 0 5,500 23 0 0
Jan 600 2,300 0 0 7,200 23 0 0
Feb 800 2,300 0 0 8,700 23 0 0
Mar 1000 2,300 0 0 10,000 23 0 0
Apr 1000 2,300 0 0 11,300 23 0 0
May 4000 2,300 0 0 9,600 23 0 0
Jun 6500 2,300 0 0 5,400 23 0 0
Jul 6000 2,300 0 0 1,700 23 0 0
Aug 4000 2,300 0 0 0 23 0 0
Total 27,600 27,600 0 0 66,100 0 2
So the Cost of current production plan will be 27,600+27,600+66,100= $16,38,800
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.