In: Accounting
Develop a Chase Strategy and a Level Strategy based on the following information.
• The Level Strategy requires the use of a constant workforce equal to the minimum requirement based on the expected demand (Note: Any needed capacity can be fulfilled with overtime.)
• Chase strategy should use ‘hiring and firing’ actions to balance the capacity.
Twenty-three workers worked during February. Illustrate and explain which is the best plan.
March |
April |
May |
June |
|
Beginning Inventory |
600 |
300 |
250 |
200 |
Demand Forecast |
1800 |
1200 |
1200 |
1800 |
Numbers of Working days by month |
21 |
200 |
21 |
22 |
Costs |
|
Materials |
$90.00 per unit |
Inventory holding cost |
$8.50 per unit per month |
Marginal cost of stockout |
$25.00 per unit per month |
Marginal cost of subcontracting |
$60.00 |
Hiring and training cost |
$4500.00 per worker |
Layoff cost |
$6000.00 per worker |
Labor hours required per unit |
3.0 per unit |
Straight-line cost (first eight hours each day) |
$12.00 per hour |
Overtime cost |
$24.00 per hour |