Consuelo Chua, Inc., is a disk drive manufacturer in need of an aggregate plan f
ID: 423417 • Letter: C
Question
Consuelo Chua, Inc., is a disk drive manufacturer in need of an aggregate plan for July through December. The company has gathered the following data given in the tables. There are 8 hours of production per day. You manage a consulting firm down the street from Consuelo Chua, Inc., and to get your foot in the door, you have told Mr. Chua that you can do a better job at aggregate planning than his current staff. He said, "Fine. You do that, and you have a 1-year contract." To make good on your boast, you propose a new strategy. Hire 5 workers in August and 5 more in October, and subcontract to meet the rest of the demand. What will be the cost of this strategy? Costs Holding cost Subcontracting Regular-time labor $12 Overtime labor $18/hour (above 8 hours) Beginning Inventory 150 disk drives Hiring cost S8/disk drive/Month S80/disk drive Other data Current workforce (June) 8 people Labor-hours/disk drive 4 hours 20 days $40/worker $80/worker En 0 disk drives cost Note that there is no holding cost for June Fill in the table below. (Enter all responses as whole numbers. In the hireffire column, use positive numbers for hires plus signs omitted; negative numbors for layoffs.) Units Personnel on Hire Ending Beginning Inventory Produced Month Demand Staff Layoff Inventory 0 June 1 July 2 August 3 Septembe 500 4 October 5 November 6 December 150 400 480 700 750 720 Enter your answer in the edit fields and then click Check Answer.Explanation / Answer
Brief facts of the case:-
Consuelo, Chua Inc. - Disk Drive Manufacturer (July-December)
Production per day:- 8 hours
Strategy:- To hire 5 new workers in August and 5 more workers in October and to subcontract to meet the rest of the demnd.
Holding cost is the cost incurred to hold the unused/unsold inventory= $8/diskdrive/month
Subcontrating is the contract given to an outsider or a firm to perform a job on its behalf=$80/diskdrive'
Regular time labour= $12
Overtime labour= $18/hour (above 8 hours)
Hiring cost is the cost incurred by the company in hiring a new employee, for example training and development cost, etc= $40/worker
Layoff Cost is the cost incurred by the company when an employee leave the company, his work gets affected and the company hires a part time worker= $80/worker
Current workforce= 8people
Labour Hours/disk drive= 4 hours (Productive Hours)
Workdays/month = 20 days
Begining Inventry= 150 Disk drives
Ending Inventory= 0 Disk Drives
To calculate Begining Inventory:-
Cost of Goods Sold + Ending Inventory = Begining Inventory
To calculate cost of Goods Sold:-
Begining Inventory + Inventory purchased during the year-Ending Inventory= Cost of Goods Sold
Annual Holding Cost= Average Inventory Level*Holding cost per unit
Economic Order Quantity is the number of times an order is placed to minimise the inventory cost
Economic Order Quantity (Q)= Square root of twice of demand * Ordering cost per unit / carrying cost per unit
In June Begining Inventory= 150 disk drives and ending inventory= 0 disk drive, Average inventory= begining inventory + ending inventory/2= 150+0/2= 75 disk drives.
Output rate per worker= 20*8/4= 40 disks per labour per month
Cost of regular time worker= 12*14080= $168960
Total Hire for 6 months=10, hiring cost= 10*40= $400
In june labour workforce= 8 workers Labour Hours per month= workers*8*20= 1280
July= 8 workers, labour hours per month= 1280 (8*8*20)
August= 13 workers, labour hours per month = 2080 (13*8*20)
September= 13 workers, labour hours per month = 2080 (13*8*20)
October= 18 workers, labour hours per month= 2880 (18*8*20)
November 18 workers, labour hours per month= 2880 (18*8*20)
December 18 workers, labour hours per month= 2880 (18*8*20)
Regular production
Labour hours/4
Total regular time production hours= 14080 for six months
Hire/Layoff
Begining Inventory July= 150 Demand= 400
Ending Inventory= Begining Inventory + Production- Demand
Total Ending inventory for six Months= 70 + 110 + 130 + 150 + 120 + 120 = 700 units
Holding cost= $8/drive/month
Total Holding Cost= 8* 700= $5600
Cost of regular time production= 12* 14080= $168960
Hiring cost=$ 40 per worker
10 workers hired during six months
Total hiring cost= 40*10= $400
Total Cost of Plan = $168960 + $ 5600 $ 400= $ 174960
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