The Barberton Municipal Division of Road Maintenance is charged with road repair
ID: 396955 • Letter: T
Question
The Barberton Municipal Division of Road Maintenance is charged with road repair in the city of Barberton and the surrounding area. Cindy Kramer, road maintenance director, must submit a staffing plan for the next year based on a set schedule for repairs and on the city budget. Kramer estimates that the labor hours required for the next four quarters are 6,000, 12,000, 19,000, and 9,000, respectively. Each of the 11 workers on the workforce can contribute 500 hours per quarter. Payroll costs are $6,000 in wages per worker for regular time worked up to 500 hours, with an overtime pay rate of $18 for each overtime hour. Overtime is limited to 20 percent of the regular-time capacity in any quarter. Although unused overtime capacity has no cost, unused regular time is paid at $12 per hour. The cost of hiring a worker is $3,000, and the cost of laying off a worker is $2,000. Subcontracting is not permitted.
Find a level staffing plan that relies just on overtime and the minimum amount of undertime possible. Overtime can be used to its limits in any quarter. What is the total cost of the plan and how many undertime hours does it call for?
Use a chase strategy that varies the workforce level without using overtime or undertime. What is the total cost of this plan?
Propose a plan of your own. Compare your plan with those in part (a) and part (b) and discuss its comparative merits.
Explanation / Answer
In level plan, equal quantities of material will, beproduced in all four quarters. To meet the requirement of 11500 labour hours per qtr. the ccompany will need 20 workers who will produce 10000 labour hours in regular and 1500 in overtime.
Cot of plan = Cost of hiring 9 workers+ cost of producing 10000 units in reguler time x4 + cost of producing 1500 units in over timex 4
= 3000x9+10000x12 x4+ 1500x18x4
= 27000+480000+108000 =615000
Chase plan
Production cost = 46000x12 = 552000
Hiring cost = 27 x3000 =81000
Firing cost = 20x2000=40000
Total cost = 552000+81000+40000 = 673000
It can be seen that the chase plan is more expensive than the level plan. The chase plan offers the benefits of lean manufacturing, producing only when needed. It is suitable for industries producing perishable goods or when the company does not want to employ greater resources, and wants to keep the inventory to its minimum. Level plan fulfilles the requirements through inventory level, while achieving greater degree of certainty. It is suitable for industries with cyclic demand, where the manufacturer amasses inventory during season of lower demand,and uses it in peak demand season.
Another plan can be a mix of these two, where the flexibility of level plan and cost effectiveness of chase plan can be achieved, after careful analysis of forecasts, trends and cyclic nature of the business with degree of uncertainty and nature of products also being a part of decision making. Judicious mix of inventory as well as manpower can be aimed to minimise the costs and improving service levels and availability.
Labour requirements /week 1 2 3 4 6000 12000 19000 9000 Regular production 6000 12000 19000 9000 Employee hired 1 12 14 0 Employees fired 0 0 0 20Related Questions
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