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 $9 per overtime hour It costs $3 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. The company is considering using overtime subject to a maximum of 25 percent of regular time hours. What is the average cost per unit if the work force is maintained at a level so that overtime can be used to the maximum of 25% of regular hours during the peak period in period 5?

Explanation / Answer

Demand during peak period = 610 units

Regular hours required during period 5 =610*20 =12200

Normal hours =12200/125*100 = 9760

Overtime hours = 25% of regular hours = 12200 -9760 = 2440

Cost per unit = $6 *9760 +$9*2440 =80520/610 =132

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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