Example 4

Period July Aug Sept Oct Nov Dec Total

Forecasted
Demand (D)
Regular
Output (O)
Overtime
Subcontract
Hire/Layoff
(O) - (D)
Inventory
Begin
End
Average
Costs
Reg prodn
(RM8/unit)
OT (RM12/hr)
Hire(RM8/hr)
Subcontract
Hire(RM400/wkr)
Layoff(RM800/wkr)
Inventory
Holding(RM6/unit)
TOTAL

nORiaH: nORiaH:
Working hrs avail = (20days x Max OT is 50% o normal working
8hrs/day x 8man)/4 manhrs/unit = hrs =0.5x320units =160units
320 units
Example 2

Period 1 2 3 4 5 6 Total
Forecasted
Demand (D) 200 200 300 400 500 200 1800
Regular nORiaH:
Output (O) 280 280 280 280 280 280 1680 Option2
optrs
Overtime(Max 40) 40 40 40 (14 wkrs
Subcontract by 8man
units/p
Hire/Layoff
(O) - (D) 80 80 20 -80 -180 80
Inventory
Begin 0 80 160 180 100 0
End 80 160 180 100 0 0
Average 40 120 170 140 50 0 520
Backlog 80 80
nORiaH
Costs Reg. pro
(RM0.25
Reg prodn = Rm2/u
(RM 2/unit) 560 560 560 560 560 560 3360
OT
(RM 3/unit) 120 120 120 360
Backorders
(RM 5/unit) 400 400
Subcontract
Hire
(RM50/wkr)
nORiaH:
Layoff RM 1/uni
average
(RM50/wkr)
Inventory
(RM 1/unit) 40 120 170 140 50 0 520
TOTAL 4640
Using maximum OT per period which is 50% of the regular prodn time i.e 140units
nORiaH:
Option2: 1 optr retire left with 14
optrs
(14 wkrs x 20days x 8hrs/day divide
by 8manhrs/unit )= 280
units/period

nORiaH:
Reg. prodn labour=
(RM0.25/hr x 8hrs/unit)
= Rm2/unit

nORiaH:
RM 1/unit for every
average unit inventory
Example 3

Period 1 2 3 4 5 6 Total
Forecasted
Demand (D) 200 200 300 400 500 200 1800
Regular Output nORiaH:
Option2
(O) - Current 280 280 280 280 280 280 1680 optrs
(O) - Hire 60 60 120 (14 wkr
(8manh
Overtime
Subcontracted nORiaH:
Hire wo
Hire (workers) 4 4 period/
Layoff (workers) 4 Numbe
(60unit
(O) - (D) 80 80 -20 -60 -160 80
Inventory
Begin 0 80 160 140 80 0
End 80 160 140 80 0 0
Average 40 120 150 110 40 0 460
Backlog 80 80
Costs nORia
Reg. pr
Production (RM0.2
Current (RM 2/unit) 560 560 560 560 560 560 3360 = Rm2

Hire - (RM 2/unit) 120 120 240

OT (RM 3/unit)
Backorders
(RM 5/unit) 400 400
Subcontract
Hire (RM50/wkr) 200 200
Layoff (RM50/wkr) 200 200
Inventory nORiaH
RM 1/uni
(RM 1/unit) 40 120 150 110 40 0 460 average
TOTAL 4860
Each hired workers can produce the same output as the current workers.
Additional of RM50 was incurred to hire and train a new worker and the same
amount of RM50 for laying off a worker.
Example 3 (Alternative method)

Period 1 2 3 4 5 6 Total
Forecasted
Demand (D) 200 200 300 400 500 200 1800
Output nORiaH
(O) - Current 280 280 280 280 280 280 1680 Option
optrs
(O) - Hire 60 60 120 (14 w
Overtime (8man

Subcontracted nORiaH
Hire w
Hire (workers) 4 4 period
Layoff (workers) 4 Numb
(60un
Total 280 280 280 340 340 280 1800
(O) - (D) 80 80 -20 -60 -160 80
Inventory
Begin 0 80 160 140 80 0
End 80 160 140 80 0 0
Average 40 120 150 110 40 0 460
Backlog 80 80
Costs nORiaH
Reg. pr
Output (RM0.2
= Rm2
Current (RM 2/unit) 560 560 560 560 560 560 3360
Hire - (RM 2/unit) 120 120 240
OT (RM 3/unit)
Backorders
(RM 5/unit) 400 400
Subcontract
Hire (RM50/wkr) 200 200
Layoff (RM50/wkr) 200 200
Inventory nORia
RM 1/u
(RM 1/unit) 40 120 150 110 40 0 460 averag

TOTAL 4860
nORiaH:
Option2: 1 optr retire left with 14
optrs
(14 wkrs x 20days x 8hrs/day)/
(8manhrs/unit )= 280 units/period

nORiaH:
Hire worker can produce 16 units/
period/wkr
Number of hire wkrs reqrd =
(60units/15units/wkr)= 4 wkrs

nORiaH:
Reg. prodn labour=
(RM0.25/hr x 8hrs/unit)
= Rm2/unit

nORiaH:
RM 1/unit for every
average unit inventory
nORiaH:
Option2: 1 optr retire left with 14
optrs
(14 wkrs x 20days x 8hrs/day)/
(8manhrs/unit )= 280 units/period

nORiaH:
Hire worker can produce 16 units/
period/wkr
Number of hire wkrs reqrd =
(60units/15units/wkr)= 4 wkrs

nORiaH:
Reg. prodn labour=
(RM0.25/hr x 8hrs/unit)
= Rm2/unit

nORiaH:
RM 1/unit for every
average unit inventory