wly and e Whoareyoukidding TV Company has just completed the demand forecast for

Question

wly and e Whoareyoukidding TV Company has just completed the demand forecast for their 85-inch TV for the next year. The demand forecast is: Quarter Demand 350 480 400 370 2 4 The following policies are in place: . They are not allowed to use overtime to build inventory They must stop all overtime before they let any employee go They must fill all customer demand (no stockouts) The other data about the company: Each employee can produce 25 TVs per quarter . The hire cost is $3,000 . The fire cost is $5,000 . The extra cost to produce one unit on overtime is $300 The inventory cost is $40 per unit per quarter based on the number of units in inventory at the end of the quarter . The maximum overtime is five units per quarter per employee There are now 11 employees There are now 20 units in inventory a. Develop a plan that uses Hire/Fire with minimal inventory. Determine he extra cost (above normal cost of labor, materials, and overhead). b. Develop a plan that hires employees only at the beginning of the first quar- ter, and after that neither hires nor fires anyone. All demand is met using overtime and inventory. Again, determine the extra cost of that plan

Explanation / Answer

(a)

Steps:

(b)

Simply hire 4 employees in the first quarter to execute the plan as shown.

Qtr. Demand Workers Hire Layoff Production Overtime Max OT Total output Ending Inventory 0 11 20 1 350 11 0 0 275 55 55 330 0 2 480 17 6 0 425 55 85 480 0 3 400 16 0 1 400 0 80 400 0 4 370 15 0 1 375 0 75 375 5 Total 6 2 110 5 Cost/ unit $3,000 $5,000 $300 $40 Total extra cost Cost $18,000 $10,000 $33,000 $200 $61,200

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