Answer the following questions for a “Mixed” Plan. What is the OT production cos
ID: 462532 • Letter: A
Question
Answer the following questions for a “Mixed” Plan.
What is the OT production cost per unit?
Develop a “Mixed” plan with a constant labor force of 170 workers and no ending inventory in excess of safety stock. Use overtime first to make up shortages if any, and then use subcontracting. Prepare a summary of costs.
Problem #1: Consider the following Aggregate Planning problem.
Demand forecast
Month
Demand
1
2400
2
2600
3
3200
4
2800
5
2900
6
3000
Cost data
Wage/hour
$18
OT pay rate
$25
Subcontracting rate/unit
$300
Carrying cost
$10
Hiring cost/worker
$1,200
Firing cost/worker
$1,400
Other data
Std. hours
11
Hours/day
8
Days/Month
22
OT Limit
15%
Initial condition
Workers on roll
150
Current inventory
50
Safety stock
30
Demand forecast
Month
Demand
1
2400
2
2600
3
3200
4
2800
5
2900
6
3000
Explanation / Answer
Answer the following questions for a “Mixed” Plan.
What is the OT production cost per unit?
OT rate/unit = Standard hours x OT wage per hour
OT rate/unit = 11 x $25 = $275 per unit
Develop a “Mixed” plan with a constant labor force of 170 workers and no ending inventory in excess of safety stock. Use overtime first to make up shortages if any, and then use subcontracting. Prepare a summary of costs.
Constant Labor Force = 170 Workers
Regular Time (RT) Production Capacity per month = 170 x 16 = 2720 units
OT production Capacity = 15% of Regular Production capacity per month
OT production Capacity = 0.15 x 2720 = 408 units
Month
Forecast Demand
RT Prod. Capacity
RT Prod.
Shortage
OT Capacity
OT Prod
Sub. Con. units
FD
RPC
RP = Min(FD,RPC)
S = FD - RP
OTC
OTP = min(OTC, S)
SC = S - OTP
1
2400
2720
2400
0
408
0
0
2
2600
2720
2600
0
408
0
0
3
3200
2720
2720
480
408
408
72
4
2800
2720
2720
80
408
80
0
5
2900
2720
2720
180
408
180
0
6
3000
2720
2720
280
408
280
0
Total
16900
16320
Cost summary
Regular wages
170 workers-month x 6 x $3168 =
$3,231,360
O.T. cost
948 units x $275 =
$260,700
S.C. cost
72 units x $300=
$22,200
Hiring cost
Firing cost
Carrying cost
Total cost
$3,514,260
Month
Forecast Demand
RT Prod. Capacity
RT Prod.
Shortage
OT Capacity
OT Prod
Sub. Con. units
FD
RPC
RP = Min(FD,RPC)
S = FD - RP
OTC
OTP = min(OTC, S)
SC = S - OTP
1
2400
2720
2400
0
408
0
0
2
2600
2720
2600
0
408
0
0
3
3200
2720
2720
480
408
408
72
4
2800
2720
2720
80
408
80
0
5
2900
2720
2720
180
408
180
0
6
3000
2720
2720
280
408
280
0
Total
16900
16320
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.