A Juarez, Mexico, manufacturer of roofing supplies has developed monthly forecas
ID: 464366 • Letter: A
Question
A Juarez, Mexico, manufacturer of roofing supplies has developed monthly forecasts for a family of products. Data for the 6-month period January to June are presented in the table below. There are 8 hours of production per day. The firm would like to begin development of an aggregate plan. For this plan, plan 5, the firm wishes to maintain a constant workforce of 6 using subcontracting to meet remaining demand. Evaluate this plan.
To determine whether this plan is desirable, first calculate demand per day for each month (enter your responses rounded to the nearest whole number).
Table 1
Month
Production Days
--Demand Forecast
--Avg Dem Per Prod. Day
1
January
22
800
?
2
February
18
650
?
3
March
21
850
?
4
April
21
1,100
?
5
May
22
1,200
?
6
June
20
1,250
?
Other data
Inventory carrying cost
$8 per unit per month
Subcontracting cost per unit
$12 per unit
Average pay rate
$5 per hour
Overtime pay Rate
$7 per hour (above 8 hrs per day)
Labor-hours per unit
1.6 hrs per unit
Cost of increasing daily production rate (hiring &training)
$300 per unit
Cost of decreasing daily production rate (layoffs)
$600 per unit
1) The production rate per day equals= ? (Enter your response as a whole number.)
Fill in the table below. (Enter your responses as whole numbers.)
Month
Demand
Regular Production
(Units) Subcontract
1
January
?
2
February
?
3
March
4
April
5
May
6
June
?
The total regular production cost equals= ? (Enter your response as a whole number.)
The total subcontracting cost equals= ? (Enter your response as a whole number.)
Total cost with plan 5 = ? (Enter your response as a whole number.)
Table 1
Month
Production Days
--Demand Forecast
--Avg Dem Per Prod. Day
1
January
22
800
?
2
February
18
650
?
3
March
21
850
?
4
April
21
1,100
?
5
May
22
1,200
?
6
June
20
1,250
?
Other data
Inventory carrying cost
$8 per unit per month
Subcontracting cost per unit
$12 per unit
Average pay rate
$5 per hour
Overtime pay Rate
$7 per hour (above 8 hrs per day)
Labor-hours per unit
1.6 hrs per unit
Cost of increasing daily production rate (hiring &training)
$300 per unit
Cost of decreasing daily production rate (layoffs)
$600 per unit
Explanation / Answer
Beginning workforce level = 6 labors
Available hours per day = 8 hours
Labor-hours per unit = 1.6 hours per unit
The production rate per day = available hours per day/ labor-hours per unit = 8/1.6
The production rate per day = 5 units
Table 1
Month
Production Days
Demand Forecast
Avg. Dem Per Prod. Day
Avg. Dem Per Prod. Day
(Rounded)
1
January
22
800
36.3636
36
2
February
18
650
36.1111
36
3
March
21
850
40.4762
40
4
April
21
1,100
52.381
52
5
May
22
1,200
54.5455
55
6
June
20
1,250
62.5
63
The Aggregate Plan is as follows:
Regular Production per month = Production rate per day x number days per month x number of labors
Regular Production per month = 5 x 6 x number days per month
Subcontracting Units = Demand Forecast – Regular production per month
Plan 5
Month
Production Days
Demand Forecast
Regular Production per month
Subcontracting units
January
22
800
660
140
February
18
650
540
110
March
21
850
630
220
April
21
1,100
630
470
May
22
1,200
660
540
June
20
1,250
600
650
Total
3720
2130
To produce regular production of 3720 units, labor hours required are 3720 x 1.6 = 5952 hours
The labor average pay rate = $5 per hours
Total Regular production cost = Labor hours required x labor average pay rate
Total Regular production cost = 5952 x 5 = $29.760
Subcontracting cost per unit = $12 per unit
Total Subcontracting cost = Subcontracting units x Subcontracting cost per unit
Total Subcontracting cost = 12 x 2130 = $25560
Total cost of aggregate plan 5 = total regular cost + total subcontracting cost
Total cost of aggregate plan 5 = $29.760 + $25560 = $55,320
Table 1
Month
Production Days
Demand Forecast
Avg. Dem Per Prod. Day
Avg. Dem Per Prod. Day
(Rounded)
1
January
22
800
36.3636
36
2
February
18
650
36.1111
36
3
March
21
850
40.4762
40
4
April
21
1,100
52.381
52
5
May
22
1,200
54.5455
55
6
June
20
1,250
62.5
63
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