Neal Industries manufactures blue jeans for the teen market. The S&OP team has a
ID: 332780 • Letter: N
Question
Neal Industries manufactures blue jeans for the teen market. The S&OP team has agreed upon a demand forecast for the following year, as shown below. The company begins with 1,800,000 jeans in safety stock and desires to maintain this level consistently (and end with this level), assume that the overtime production wage rate is $24 per hour.
a. Develop a chase plan using a stable workforce of 300 workers. (Leave no cells blank - be certain to enter "0" wherever required.)
b. Compute the cost of a chase plan using a stable workforce of 300 workers.
Explanation / Answer
Quarter
Demand
Regular Production
Overtime Production
Ending Inventory (E)
Workers Required
Hire
Fire layoff
D
R
O
1800000
1
7,500,000
300*25,000
= 7500000
7,500,000+0+1,800,00-7,500,000
= 1,800,000
2
8,300,000
7500000
R+O+E-D
= 7,500,000+0+1,800,00
= 1,000,000
3
15,000,000
7500000
15,000,000-(7500000+1,000,000)
= 6,500,000
0
4
12,500,000
7500000
12,500,000-(7500000+0)
= 5,000,000
0
Total units
43,300,000
30,000,000
11500000
2800000
0
0
Hours required
30,000,000/500
= 60000
23000
Hourly rate
16
24
0.5
Total cost
60,00*16
= 960,000
23,000*24
= 552,000
2,800,000*0.5
= 1,400,000
Plan Cost
2,912,000
Plan Cost = $2,912,000
Quarter
Demand
Regular Production
Overtime Production
Ending Inventory (E)
Workers Required
Hire
Fire layoff
D
R
O
1800000
1
7,500,000
300*25,000
= 7500000
7,500,000+0+1,800,00-7,500,000
= 1,800,000
2
8,300,000
7500000
R+O+E-D
= 7,500,000+0+1,800,00
= 1,000,000
3
15,000,000
7500000
15,000,000-(7500000+1,000,000)
= 6,500,000
0
4
12,500,000
7500000
12,500,000-(7500000+0)
= 5,000,000
0
Total units
43,300,000
30,000,000
11500000
2800000
0
0
Hours required
30,000,000/500
= 60000
23000
Hourly rate
16
24
0.5
Total cost
60,00*16
= 960,000
23,000*24
= 552,000
2,800,000*0.5
= 1,400,000
Plan Cost
2,912,000
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