Lecture 6

Public Administration
Example 1:
You are given the following information about the expected demand on a
product generated by a public organization
Period in years Forecasted demand in units
1 2,000
2 4,000
3 5,000
4 3,000
5 2,000
6 6,000
Beginning period inventory =5,000 units
The time required to produce 1 unit =10 hours
The cost associated with hiring 1 worker= $2000
The cost associated with laying off 1 worker=$4000
Each worker can work 200 hours per period
The current number of workers = 60
If you know that:
1. The public organization produces based on forecasted demand
2. Workers are employed on contractual bases
Required:
Forecast the future needs of the public organization of workers for the
six periods.

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Solution:
period Forecasted Forecasted Production Required hiring Laying
demand production time in workers off
volume hours
1 2,000 0 0 0 0 60
2 4,000 1,000 10,000 50 50 ---
3 5,000 5,000 50,000 250 200 ---
4 3,000 3,000 30,000 150 --- 100
5 2,000 2,000 20,000 100 --- 50
6 6,000 6,000 60,000 300 200 ---
450 210
1- Total number of employees to be hired = 450 workers
2- Total number of workers to be laid off = 210 workers
3- Total cost associated with hiring workers: (450 *2,000) =$900,000
4- Total laying off costs workers: (210 * 4,000) = $840,000
5- Total cost associated with hiring and laying off workers:
$900,000 + $840,000
=$1,740,000

Example 2:
The estimated future production volume during the next 5 years for a
public good is 60,000 units per year. Time studies show that the
performance of 6 workers is 30 units per day. Total number of working
days per year is 300 days for each worker. Annual workers turnover is
2%. What is the number of workers required at the beginning of January
in 2023to produce 60,000 units per year?
Solution:
The number of units produced by each worker \day:
= 30\6 = 5 units

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Total number of units produced by each worker \year:
= the total number of units produced by each worker \day * number of
working days \year
5 *300 = 1,500 units
Total number of workers required before turnover:
Total number or forecasted production \ total number of units produced
by each worker \year
=60,000\1,500 = 40 workers
Workers turnover:
Total number of workers before turnover * workers turnover rate
= 40 * 0.02 = 0.8 ~ 1 worker
Total numbers of workers required after taking into consideration
workers turnover:
40 +1 = 41 workers
Example 3:
The estimated production volume of a public product is 1,000,000 units
per year. If you know that each worker can produce 10 units \day, and
the total number of working days per year is 250 days. The annual
workers turnover is estimated to be 2.5%. What is the total number of
required workers?
Solution:
Total number of units produced by each worker \year:

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= the total number of units produced by each worker \day * number of
working days \year
10 *250 = 2,500 units
Total number or workers required before turnover:
Total number or forecasted production \ total number of units produced
by each worker \year
=1,000,000\2,500 = 400 workers
Workers turnover:
Total number of workers before turnover * workers turnover rate
= 400 * 0.025 = 10s worker
Total numbers of workers required after taking into consideration
workers turnover:
400 +10 = 410 workers.
Using correlation to estimate the future expected needs of work
force in public organizations
Example 4:
You are given the following information about the investment values
and the size of the work force during the period extending from 2017 to
2022
year $ investments Size of work force
(in thousands) (in thousands)
2017 22 2
2018 26 3
2019 30 3.5

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 2020 33 4.5
2021 34 5
2022 35 6
Required:
Estimate the future expected needs of the work force for 2023, if you
know that the forecasted investments are expected to be $40,000
Solution:
Correlation coefficient = Σ (x-xˉ) (y-yˉ) \ √ Σ (x-xˉ)2 Σ(y-yˉ)2
X: dollar value of investments
Y: size of the work force
Xˉ : Σ x\ number of years
= 180\6 =30
yˉ: Σ y\ number of years
=24\6 = 4
year x y (x-xˉ) (y-yˉ) (x-xˉ) (x-xˉ)2 (y-yˉ)2
(y-yˉ)
2017 22 2 -8 -2 16 64 4
2018 26 3 -4 -1 4 16 1
2019 30 3.5 0 -0.5 0 0 0.25
2020 33 4.5 3 0.5 1.5 9+ 0.25
2021 34 5 4 1 4 16 1
2022 35 6 5 2 10 25 4
180 24 35.5 130 10.5
Correlation coefficient = Σ (x-xˉ) (y-yˉ) \ √ Σ (x-xˉ) Σ(y-yˉ)
2 2

35.5\ √1365
=35.5\ 36.95
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=0.96 =96%
Since there is a high degree of correlation between the investment value
and the size of the work force; therefore; the $ value of investment could
be used to forecast the future expected needs of the work force for 2023,
that could be conducted using the following equation:
yᵔ = yˉ + [Σ (x-xˉ) (y-yˉ) \ Σ (x-xˉ)2] * (xᵔ-xˉ)
yᵔ: the future expected work force for 2023
xᵔ: investment size for 2023
yᵔ: 4 + [(35.5\130) * (40-30)]
=6.730 *1,000 = 6,730 workers
Example 5:
The government has decided to expand its electronic services in the
entire country. You are given the following information about the
investment values and the size of the work force during the period
expanding from 2019 to 2022
year $ investment Size of the work force
(in thousands) (in thousands)
2019 20 3
2020 25 5
2021 30 7
2022 25 5
Estimate the future work force for 2023. If you know that the forecasted
investments are expected to be $50,000
Solution:
Correlation coefficient = Σ (x-xˉ) (y-yˉ) \ √ Σ (x-xˉ)2 Σ(y-yˉ)2

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 X: dollar value of investments
Y: size of the work force
Xˉ : Σ x\ number of years
= 100\4 =25
yˉ: Σ y\ number of years
=20\4 = 5

year x y (x-xˉ) (y-yˉ) (x-xˉ) (x-xˉ)2 (y-yˉ)2

(y-yˉ)
2019 20 3 -5 -2 10 25 4
2020 25 5 0 0 0 0 0
2021 30 7 5 2 10 25 4
2022 25 5 0 0 0 0 0
100 20 20 50 8
Correlation coefficient = Σ (x-xˉ) (y-yˉ) \ √ Σ (x-xˉ) Σ(y-yˉ)
2 2

20\ √400
=20 \20 = 1
Since there is perfect correlation between the investment value and the
size of the work force; therefore; the $ value of investment could be used
to forecast the future expected needs of the work force for 2023, that
could be conducted using the following equation:
yᵔ = yˉ + [ Σ (x-xˉ) (y-yˉ) \ Σ (x-xˉ)2 * (xᵔ-xˉ)]
yᵔ: the future expected work force for 2023
xᵔ: investment size for 2023
yᵔ =5 + [(20 \50) * (50 -25)] = 15,000 workers

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