Question

Kindly, do not hand write, use excel or word document, please let the work be original

Capacity Planning Homework Assignment—To be Submitted

The Baltimore Manufacturing Company’s management forecasts demand for each quarter as follows:

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Average quarterly demand	7000 units	9000 units	10000 units	8000 units

Assume that Arundel, Inc. started the First Quarter with 20 workers and 2000 units in inventory. The company wishes to finish the year with an inventory of 5000 units on hand. The average pay per worker is $9,000 per quarter, including benefits. Production per worker is 100 units per quarter. If necessary, overtime can be used up to 20% during the two peak demand quarters. Overtime time work, if used, is paid at 150% of regular pay. It costs $900 to hire a new worker and $1,200 to lay off a worker. Inventory carrying cost averages $10 per unit per month.  

(A) Using the table below, determine the total cost of using Level strategy.

Resources	Summer	Fall	Winter	Spring	Total
Beg. Inventory
Production
Demand
Ending Inventory
Costs
Regular labor cost
Hiring/firing cost
Inv. Carrying cost
Other costs, if any
Total

.

(B) Using the table below, determine the cost of using the Chase strategy.

Resources	Summer	Fall	Winter	Spring	Total
Beg. Inventory
Production
Demand
Ending Inventory
Costs
Regular labor cost
Hiring/firing cost
Inv. Carrying cost
Other costs, if any
Total

(C) Which strategy do you recommend and why?

For Bonus Points

(D) Management is considering using a mixed strategy. Suppose level strategy plus 10% overtime is used for the two high demand seasons, how many workers will be needed. (You don’t need to compute the total costs in this case. Simply determine the number of workers that will be need.

Answer 1

ANSWER :
A. LEVEL STRATEGY COST:
QUARTER	1	2	3	4	TOTAL
FORECAST	7000	9000	10000	8000	34000
OUTPUT
REGULAR	9300	9300	9300	9300	37200
OVERTIME
INEVENTORY
BEGINNING INVENTORY	2000	4300	4600	3900
ENDING INVENTORY	4300	4600	3900	5200
HIRE	73
FIRE
WORKFORCE	20	93	93	93
COSTS
REGULAR	837000	837000	837000	837000	3348000
OVERTIME
INVENTORY HOLDING	43000	46000	39000	52000	180000
HIRING	65700				65700
FIRING
TOTAL COSTS	945700	883000	876000	889000	3593700
B):- CHASE STRATEGY COST:- 3479000
QUARTER	1	2	3	4	TOTAL
FORECAST	7000	9000	10000	8000	34000
OUTPUT
REGULAR	5000	9000	10000	13000	37200
OVERTIME
INEVENTORY
BEGINNING INVENTORY	2000
ENDING INVENTORY				5000
HIRE	30	40	10	30
FIRE
WORKFORCE	20	50	90	100
COSTS
REGULAR	450000	810000	900000	1170000	3330000
OVERTIME
INVENTORY HOLDING				50000	50000
HIRING	27000	36000	9000	27000	99000
FIRING
TOTAL COSTS	477000	846000	909000	1247000	3479000
C):- CHASE STRATEGY IS BETTER AS TOTAL COSTS ARE LOWER..
D):-MIXED STRATEGY, NUMBER OF WORKERS.
QUARTER	1	2	3	4	TOTAL
FORECAST	7000	9000	10000	8000	34000
OUTPUT
REGULAR	8900	8900	8900	8900	35000
OVERTIME		890	890		1780
INEVENTORY
BEGINNING INVENTORY	2000	3900	4690	4480
ENDING INVENTORY	3900	4690	4480	5380
HIRE	69
FIRE
WORKFORCE	20	89	89	89
TOTAL WORKER NEEDED ARE 89..