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. The company plans to maintain a constant production rate, begin and end the year with the same inventory level, and absorb all demand fluctuation by accumulating and depleting inventory. The number of employees will be set at a level so that no overtime will be required. What will be the average cost per unit due to the cost of labour and the additional inventory held during the year?

Explanation / Answer

Demand Hours required Hours available Unit produced Opening inventory Production Closing inventory Labor cost Carrying cost Total 400 8000 9600 480 0 480 80 57600 240 57840 380 7600 9600 480 80 480 180 57600 540 58140 470 9400 9600 480 180 480 190 57600 570 58170 530 10600 9600 480 190 480 140 57600 420 58020 610 12200 9600 480 140 480 10 57600 30 57630 500 10000 9600 480 10 480 -10 57600 0 57800 9600 480 345600 1800 1920 Number of employees required Total Hours / Total demand 30 employees Total cost 347400

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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