Chapter 13

Cost data
regular time labor cost/hour $10.00
overtime labor cost/hour $15.00
subcontracting cost/unit (labor only) $84.00
holding cost/unit/period $10.00
backorder cost/unit/period $20.00
hiring cost/employee $600.00
firing cost/employee $450.00
Capacity data
beginning workforce (# employees) 210
beginning inventory (units) 400
labor standard time/unit (hours) 6
regular time available/period (hours) 160
overtime available/period (hours) 32
subcontracting maximum units/period 1000
subcontracting minimum units/period 500
Demand data (units)
Period 1 6000
Period 2 4800
Period 3 7840
Period 4 5200
Period 5 6560
Period 6 3600
Total 34000

Problem 13.1: Level aggregate plan--backorders allowed

1.a. Aggregate production rate/period = 5600 units
(total demand-BI)/# periods = (34,000-400)/6 = 5600
1.b. Workforce needed/period = 210 employees
(prod rate*hrs/unit)/(hrs/emp) = (5600*6)/160 = 210

1.c.
Period 1 2 3 4 5 6 Total
demand 5600 4800 7840 5200 6560 3600 33600
cumulative demand 5600 10400 18240 23440 30000 33600
period production 5600 5600 5600 5600 5600 5600 33600
cumulative production 5600 11200 16800 22400 28000 33600
ending inventory 0 800 0 0 0 0 800
backorders 0 0 1440 1040 2000 0 4480
hires 0 0 0 0 0 0 0
fires 0 0 0 0 0 0 0
1.d
labor cost $2,016,000.00 (#employees*hrs/period*#periods*labor cost)
carrying cost $8,000.00
backorder cost $89,600.00
hiring cost $0.00
firing cost $0.00
Total cost $2,113,600.00
1.e
Cost: good. $109,400 less than plan 3,4; $190,400 less than plan 5.
Customer service: poor. Large number of backorders in periods 3, 4, and 5-->dissatisfaction.
Operations: good. Easy to implement, constant level of resource usage.
Human resources: good. Workforce level, constant work requirements.
Problem 13.3, 4: Chase aggregate plan
3.
Period 1 2 3 4 5 6
employees needed 210 180 294 195 246 135

4.a.
Period 1 2 3 4 5 6 Total
demand 5600 4800 7840 5200 6560 3600 33600
cumulative demand 5600 10400 18240 23440 30000 33600
period production 5600 4800 7840 5200 6560 3600 33600
ending inventory 0 0 0 0 0 0 0
backorders 0 0 0 0 0 0 0
employees needed 210 180 294 195 246 135 1260
hires 0 0 114 0 51 0 165
fires 0 30 0 99 0 111 240
4.b.
labor cost $2,016,000.00
carrying cost $0.00
backorder cost $0.00
hiring cost $99,000.00
firing cost $108,000.00
Total cost $2,223,000.00
4.c.
Cost: middle. $109,400 more than plan 1; $81,000 less than plan 5
Customer service: good. No backorders, so orders should be filled on time.
Operations: weak. Hiring/firing ongoing; variable level of resource usage/period.
Human resources: poor. Constant hiring/firing; variable workforce level-->poor morale.

Problem 13.5: Chase aggregate plan--current workforce with overtime & undertime
5.a., b., c., d.
Period 1 2 3 4 5 6 Total
demand 5600 4800 7840 5200 6560 3600 33600
cumulative demand 5600 10400 18240 23440 30000 33600
period production 5600 4800 7840 5200 6560 3600 33600

production hours needed 33600 28800 47040 31200 39360 21600 201600
employees needed 210 210 210 210 210 210 1260
production hours
available 33600 33600 33600 33600 33600 33600 201600
overtime 0 0 13440 0 5760 0 19200
undertime 0 4800 0 2400 0 12000 19200

Note: overtime available is 32 hours/employee/period; maximum = 210 * 32 = 6,720 hours.

5.e. labor cost $2,016,000.00

overtime cost $288,000.00
Total cost $2,304,000.00

5.f. Cost: weak. $190,400 more than plan 1; $81,000 more than plan 3,4.
Customer service: good. No backorders, so orders should be filled on time.
Operations: fair. Excessive overtime needed in period 3; undertime in some periods.
Human resources: fair. Excess overtime acceptable?