Demand Forecast A company has the following demand forecast next year, expressed

Question

Demand Forecast A company has the following demand forecast next year, expressed in six bimonthly (2-month) periods in this table The following costing data have been obtained Each employee works 160 regular working hours per month Each unit requires 20 standard hours to produce The labour costs are $6 per normal hour and S9 per overtime hour It costs S3 per month to hold an item in inventory Use the following rules in rounding off the number of employees If the decimal is 0.5 or more, round up. e.g. round 32.6 to 37 If the decimal is less than 0.5. round down if the number of employees is decreasing, i.e. lower than the previous period. If the decimal is less than 0.5. round up if the number of employees is increasing, i.e. higher than the previous period How many employees will be needed during the peak demand of 610 units in period 5 if no overtime production is to be scheduled? What will be the average labour cost for each unit if the company maintains for the entire year sufficient staff to meet the peak demand without overtime? What percentage above the standard-hour cost is the company's average labour cost per unit in this year due to the company's decision to maintain stable employment sufficient to serve the peak demand period without overtime?

Explanation / Answer

a) Each unit requires 20 hours, so 610 units * 20 hours=12,200 hours

Each employee works 160 hours

Employee needed = 12,200 hours / 160 hours

76 employees

_______________________________________________________________________________

b) Average labor cost is Each unit needs 20 hours to complete, $6 per hour for labor=$120

yes, they can meet without over time. in the peak demand also

totally 2890 units is there and each unit completed within 20 hours

2890 units * 20 hours = 57,800 hours

Each labor hour pays= $6

So, 57,800 hours   * $6=$346,800

AVerage labor cost for each unit is

=$346,800 / 2890 units

=$120

(400 + 380+ 470+530+610+500= 2890 units)

In the peak demand 610 units * 20 hours per unit = 12,200 hours *$ 6 =$73,200

$73,200 / 610 units =$120

_____________________________________________________________________________

c)20%

Average labor cost is $120

and standard hour cost is $6

=$120/$6

=20

_________________________________________________________________________________

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.