Trexoid Inc. makes a popular video game console. Demand varies each month, with
ID: 337482 • Letter: T
Question
Trexoid Inc. makes a popular video game console. Demand varies each month, with highest demand coming in the last quarter of the year. Regular production costs are $280 per unit and inventory carrying cost is $3 per unit per quarter. Overtime production cost is $310 per unit. Assume that the 20 current Trexoid employees can produce a total of 50,000 units per quarter in regular production and can work enough overtime hours to produce the amount required if a chase plan is employed. On the other hand, hiring cost is $7,500 per employee and firing cost is $12,500 per employee. Trexoid currently has zero inventory on hand, and they would like to have zero inventories at the end of the year. Assume hiring and layoff/firing, if necessary, occur at the beginning of the quarter. Forecasted demand is as follows:
Quarter 1
30,000
units
Quarter 2
20,000
units
Quarter 3
60,000
units
Quarter 4
130,000
units
a. Given the above demand estimate, develop a production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.)
Level Production Plan
Quarter
Demand
Regular Production
Ending Inventory
Number of Workers
Hire
Fire
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
b. Determine the cost of the level production plan.
Total cost=
c. Given the planning information, develop a production plan based on chase production. (Leave no cells blank - be certain to enter "0" wherever required.)
Chase Production Plan – Overtime with Stable Workforce
Quarter
Demand
Regular Production
Overtime Production
Ending Inventory
Number of Workers
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
Chase Production Plan – Changing Workforce Levels
Quarter
Demand
Regular Production
Ending Inventory
Number of Workers
Hire
Fire
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
d. Determine the cost of the chase production plan.
Total cost if overtime production used
Total cost if workforce size adjusted
Quarter 1
30,000
units
Quarter 2
20,000
units
Quarter 3
60,000
units
Quarter 4
130,000
units
Explanation / Answer
Trexoid Inc. makes a popular video game console. Demand varies each month, with highest demand coming in the last quarter of the year. Regular production costs are $280 per unit and inventory carrying cost is $3 per unit per quarter. Overtime production cost is $310 per unit. Assume that the 20 current Trexoid employees can produce a total of 50,000 units per quarter in regular production and can work enough overtime hours to produce the amount required if a chase plan is employed. On the other hand, hiring cost is $7,500 per employee and firing cost is $12,500 per employee. Trexoid currently has zero inventory on hand, and they would like to have zero inventories at the end of the year. Assume hiring and layoff/firing, if necessary, occur at the beginning of the quarter. Forecasted demand is as follows:
Quarter 1
30,000
units
Quarter 2
20,000
units
Quarter 3
60,000
units
Quarter 4
130,000
units
a. Given the above demand estimate, develop a production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.)
Level Production Plan
Quarter
Demand
Regular Production
Ending Inventory
Number of Workers
Hire
Fire
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
b. Determine the cost of the level production plan.
Total cost=
c. Given the planning information, develop a production plan based on chase production. (Leave no cells blank - be certain to enter "0" wherever required.)
Chase Production Plan – Overtime with Stable Workforce
Quarter
Demand
Regular Production
Overtime Production
Ending Inventory
Number of Workers
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
Chase Production Plan – Changing Workforce Levels
Quarter
Demand
Regular Production
Ending Inventory
Number of Workers
Hire
Fire
1
30,000
2
20,000
3
60,000
4
130,000
Total
240,000
d. Determine the cost of the chase production plan.
Total cost if overtime production used
Total cost if workforce size adjusted
Quarter 1
30,000
units
Quarter 2
20,000
units
Quarter 3
60,000
units
Quarter 4
130,000
units
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