The matching demand manufacturing strategy

The Austin, Texas plant of Computer Products produces disk drives for personal and small business computers. Gerald Knox, the plant’s production planning director, is looking over next year’s sales forecasts for these products and will be developing an aggregate capacity plan for the plant. The quarterly sales forecasts for the disk drives are as follows:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

2,340 2,610 2,700 2,790

Ample machine capacity exists to produce the forecast. Each disk drive takes an average of 20 labor-hours. In addition, you have collected the following information:

a. Inventory holding or carrying cost is $100 per disk drive per quarter. The holding cost is based on the inventory at the end of each quarter.

b. The plant works the same number of days in each quarter, 12 five-day weeks, 6 hours per day.

c. Beginning inventory is zero disk drives.

d. In a backlog situation, the customer will wait for his order to be filled but will expect a price reduction each quarter he waits. The backlog costs are $300 per floppy disk for the first quarter the customer waits, $700 for the second quarter the customer waits, and $900 for the third quarter the customer waits. In any quarter, if there is a backlog, this backlog will be filled before the demand for that period is filled.

e. The cost of hiring a worker is $800 while the cost of laying off a worker is $950.

f. The straight time labor rate is $20 per hour for the first quarter and increases to $22 per hour beginning in the second quarter.

g. Overtime work is paid at time and a half (150%) of the straight time work.

h. Outsourcing (contract work) is paid at the rate of $475 per disk unit for the labor and you provide the material

i. Demand is projected to increase this year. Demand during the fourth quarter of the prior year was 2,340 units and this was met with a workforce that was fully employed with no under utilization and no overtime. The demand for the first quarter of the next year (year following the year you are analyzing) is projected to be at the 2,700 unit level.

a) You want to maintain a work force capable of producing 2,610 in a quarter. This work force is fully employed and there is no under utilization. If more units are produced in a quarter than are needed, they will be used to help meet demand in future periods. When demand in a quarter cannot be met from the units produced in that quarter or from units produced in previous quarters, the company will use overtime to meet the unfilled demand. What is the total cost of this option, excluding the material cost? Be sure to include any hiring and layoff costs.

b) The company will use a modified form of the matching demand strategy. Not exceeding a workforce capable of producing 2,520 units in a quarter, the company will match the workforce in each quarter to the demand for that quarter. To meet the demand in any quarter when the workforce at full utilization cannot meet the demand, the company will use outsourcing to meet the unfilled demand. What is the total cost of this option, excluding the material cost? Be sure to include any hiring and layoff costs.

My Homework Nest
Calculate your paper price
Pages (550 words)
Approximate price: -
AllEscort