solution
You are the operations manager for an OEM manufacturing plant that produces YBOX game consoles. Based on the sales record from 2014, the marketing manager forecasts the demand for Jan-May of 2015 in Table 1:
Table 1
|
Time Period |
JAN |
FEB |
MAR |
APR |
MAY |
Total |
|
Demand Forecast |
3,500 |
4,500 |
6,000 |
6,500 |
5,000 |
|
|
Number of Working Days per Time Pd |
20 |
20 |
20 |
20 |
20 |
Table 2
|
Production Time |
1 hour per unit |
|
Average labor cost |
$12 per hour |
|
Workweek |
5 days, 8 hours per day |
|
Days per month |
20 work days per month |
|
Beginning inventory |
1,000 units |
|
Safety stock |
One month |
|
Shortage cost |
$10 per unit per month |
|
Carrying cost |
$4 per unit per month |
Table 3
|
Time Period |
January |
February |
March |
April |
May |
Total |
|
Beginning Inventory |
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|
Working Days per Month |
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|
Production Hours Available (Working days per month x hrs/day x # of workers) 23 workers* |
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|
Actual Production (Production hrs available / labor hrs required per unit) |
||||||
|
Demand Forecast |
||||||
|
Ending Inventory (Beginning inventory + Actual production – Demand Forecast) |
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|
Units Short (Absolute value of a negative ending inventory) |
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|
Shortage Cost (Units short x Cost of stockout) |
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|
Safety Stock (one month) |
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|
Units Excess (Ending inventory – Safety Stock) only if positive amount |
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|
Inventory Cost (units excess x Inventory holding cost) |
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|
Straight Time Cost (Production hrs available x Straight time labor cost) |
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|
* (Sum of Production Requirement hr/unit) / (Sum of Production Hours Available x 8 hr /day) = (16,000 x 1) / (100 x 8) = 23 |
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As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. Assuming you currently have 23 workers, what is the total cost of this plan (e.g., adding all costs from January to May)? You can use Table 3 to figure out the cost structure
| A. |
$249,200 |
|
| B. |
$349,200 |
|
| C. |
$296,400 |
|
| D. |
$386,200 |
|
| E. |
$329,800 |
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