A local company makes athletic clothing and they are preparing aggregate product
ID: 425024 • Letter: A
Question
A local company makes athletic clothing and they are preparing aggregate production plans on a quarterly basis for the coming year for their line of women's wear. They have the following information available to develop a level capacity and a matching (chase) demand plan:
(Assume that pattern of demand repeats each year, that is the demand in quarter 4 of the previous year was 13,000 units)
Number of working days per quarter = 65 days
Number of hours per day per person = 8 hours
Labor to produce one unit = 5 hours
Demand for four quarters respectively:
12,300, 12,500, 12,200, 13,000 units
Cost of hiring a worker = $800
Cost of laying off a worker = $500
Inventory carrying cost per unit per year = $60
What is the total cost to hire workers under a matching (chase) strategy?
A) $4,500
B) $4,800
C) $6,400
D) $7,200
E) $14,400
Explanation / Answer
Time taken per worker to produce 1 unit = 5 hours
Therefore, number of units which can be produced by 1 worker per day of 8 hours = 8/5 = 1.6 units
Therefore, number of units which can be produced by 1 worker per quarter of 65 days = 1.6 x 65 = 104 units
Number of workers needed to produce 12300 units in 1st quarter = 12300 / 104 = 118.26 ( 119 rounded to next higher whole number )
Number of workers needed to produce 12500 units in 2nd quarter = 12500/104 = 120.19 ( 121 rounded to next higher whole number )
Number of workers needed to produce 12200 units in 3rd quarter = 12200/ 104 = 117.30 ( 118 rounded to nearest whole number )
Number of workers needed to produce 13000 units in 4th quarter = 13000/104 =125
Thus,
Number of workers to be hired in 1st quarter = 119
Number of additional workers to be hired in 2nd quarter = 121 – 119 = 2
Number of workers to be fired in 3rd quarter = 121 – 118 = 3
Number of workers to be hired in 4th quarter = 125 – 118 = 7
On basis of above calculation, we would fix base workforce as 119 at the beginning which would be sufficient to cater to requirement of quarter 1
Therefore , total number of workers to be hired over and above the base worker level during 2nd and 4th quarter = 2 + 7 = 9
Total cost of hiring workers ( @ $800 per worker ) = $800 x 9 = $7200
TOTAL COST OF HIRING WORKERS UNDER A MATCHING STRATEGY : D ) $7200
TOTAL COST OF HIRING WORKERS UNDER A MATCHING STRATEGY : D ) $7200
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