Question

Computer’s R Us, is a manufacturer of computer keyboards. The requirements over a typical six-month period are as follows;

Demand per month.

1: 600

2: 600

3: 450

4: 750

5: 900

6: 300

The current workforce level is 4 workers.
Production rate is 150/worker/month.

The following costs apply:Wages = $2,000/worker/month
Hiring cost = $200/worker
Layoff Cost = $250/worker
Inventory holding cost = $1/unit/month
Back ordering cost = $2/unit/month

What would be the production rate per month for a level strategy?

Answer 1

Computer’s R Us Level strategy

1 2 3 4 5 6 total Costs

requirement 600 600 450 750 900 300 3600

produce 600 600 600 600 600 600 3600

# emp needed 4 4 4 4 4 4 24 $48,000

hire 0 0 0 0 0 0 0 $ -  

layoff 0 0 0 0 0 0 0 $ -  

beg inv 0 0 0 150 0 0 150

end inv 0 0 150 0 0 300 450 $ 450

backorders 0 0 0 0 300 0 300 $ 600

current workforce 4 workers

production rate 150 units/worker/month

wages $2,000 per worker/month

hiring cost $ 200 per worker

layoff cost $ 250 per worker

holding cost $ 1 per unit/month

back-ordering cost $ 2 per unit/month

total demand 3600 units

average demand 600 units

worker needed 4 nos.

hence, the total inventory cost= $ 450

Option b is correct