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In: Accounting

Problem 8-8 Plan production for a four-month period: February through May. For February and March, you...

Problem 8-8

Plan production for a four-month period: February through May. For February and March, you should produce to exact demand forecast. For April and May, you should use overtime and inventory with a stable workforce; stable means that the number of workers needed for March will be held constant through May. However, government constraints put a maximum of 5,000 hours of overtime labor per month in April and May (zero overtime in February and March). If demand exceeds supply, then backorders occur. There are 90 workers on January 31. You are given the following demand forecast: February, 80,960; March, 66,240; April, 100,080; May, 40,080. Productivity is four units per worker hour, eight hours per day, 23 days per month. Assume zero inventory on February 1. Costs are hiring, $55 per new worker; layoff, $75 per worker laid off; inventory holding, $11 per unit-month; straight-time labor, $10 per hour; overtime, $15 per hour; backorder, $20 per unit.

Develop a production plan and calculate the total cost of this plan. Note: Assume any layoffs occur at beginning of next month. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to the nearest whole number.)

February March April May
Forecast 80,960 66,240 100,080 40,080
Beginning inventory
Production required
Production hours required
Regular workforce
Regular production
Overtime hours
Overtime production
Total production
Ending inventory
Ending backorders
Workers hired
Workers laid off
February March April May
Straight time $ $ $ $
Overtime
Inventory
Backorder
Hiring
Layoff
Total $ $ $ $
Total cost $

Solutions

Expert Solution

February March April May
Forecast 80,960 66,240 100,080 40,080
Beginning inventory 0 0 0 0
Production required 80,960 66,240 100,080 40,080
Production hours required 20240 16560 25020 10020
Regular workforce 110 90 90 90
Regular production 80960 66240 66240 66240
Overtime hours 0 0 5000 0
Overtime production 0 0 20000 0
Total production 80960 66240 86240 66240
Ending inventory 0 0 0 26,160
Ending backorders 0 0 13,840 0
Workers hired 20 0 0 0
Workers laid off 0 20 0 0
February March April May
Straight time $ 202,400 $ 165,600 $ 165,600 $     165,600
Overtime $             -   $             -   $    75,000 $                 -  
Inventory $             -   $             -   $             -   $     287,760
Backorder $             -   $             -   $ 276,800 $                 -  
Hiring $      1,100 $             -   $             -   $                 -  
Layoff $             -   $      1,500 $             -   $                 -  
Total $ 203,500 $ 167,100 $ 517,400 $     453,360
Total cost $ 1,341,360

Explanations

A

B

C

D

E

F

G

H

1

February

March

April

May

2

Forecast

80960

66240

100080

40080

Productivity

=G3*G4*G5

3

Beginning inventory

0

0

0

0

4

units per worker

4

Production required

=B2

=C2

=D2

=E2

8

hours per day

5

Production hours required

=B4/4

=C4/4

=D4/4

=E4/4

23

days per month

6

Regular workforce

=B4/G2

90

=C6

=C6

7

Regular production

=B6*G2

=C6*G2

=D6*G2

=E6*G2

8

Overtime hours

0

0

5000

0

9

Overtime production

0

0

=D8*4

0

10

Total production

=B7+B9

=C7+C9

=D7+D9

=E7+E9

11

Ending inventory

=B10-B4

=C10-C4

0

=E10-E4

12

Ending backorders

0

0

=D2-D10

0

13

Workers hired

=B6-90

0

0

0

14

Workers laid off

0

=B13

0

0

15

16

February

March

April

May

17

Straight time

=B6*8*23*10

=C6*8*23*10

=D6*8*23*10

=E6*8*23*10
ekkarill92 answered 2 years ago
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