Production Production at Demand Demand Per Monthly

Month Ending
Days 50 units per day Forecast Day Inventory
Inventory
(computed) Change (+/-)
January 22 1100 900 41 +200 200
February 18 900 700 39 +200 400
March 21 1050 800 38 +250 650
April 21 1050 1,200 57 -150 500
May 22 1100 1,500 68 -400 100
June 20 1000 1,100 55 -100 0
124 6,200 1,850 units

Finding the Total Production Days:

Jan (22) + Feb (18) + Mar (21) + Apr (21) + May (22) + June (20)

= 124 Total Production Days

Finding the Total Demand Forecast:

Jan (900) + Feb (700) + Mar (800) + Apr (1,200) + May (1,500) + June (1,100)

= 6,200 Total Demand Forecast

Finding the Average Requirement:

6,200
=
124
= 50 units per day

Finding the number of workers needed:

8 working hours per day / 1.6 Labor-hours per day = 5 units

50 units / 5 units = 10 workers

Finding the Production Days per Month: Finding the Monthly Inventory Change per
Jan - (22) * (50) = 1,100 Month:
Feb - (18) * (50) = 900 Jan - 1,100 - 900 = +200
Mar - (20) * (50) = 1,050 Feb - 900 - 700 = +200
Apr - (20) * (50) = 1,050 Mar - 1,050 -1,200 = +250
May - (22) * (50) = 1,100 Apr - 1,050 - 1,200= -150
Jun - (20) * (50) = 1,000 May - 1,100 - 1,500 = -400
Jun - 1,000 - 1,100 = -100

Finding the Demand per Day per Month: Finding the Ending Inventory per Month:
Jan - 900 / 22 = 40.9 or 41 Jan = 200
Feb - 700 / 18 = 38.89 or 39 Feb - 200 + 200 = 400
Mar - 800 / 21 = 38.09 or 38 Mar - 400 + 250 = 650
Apr - 1,200 / 21 = 57.14 or 57 Apr - 650 - 150 = 500
May - 1,500 / 22 = 68.18 or 68 May - 500 - 400 = 100
Jun - 1,100 / 20 = 55 Jun - 100 - 100 = 0

Plan
Plan #1:
#1:
Inventory
InventoryCarrying
CarryingCost
Cost(ICC)
(ICC)==1,850 units**₱10
1,850units ₱10per unit==₱18,500
perunit ₱18,500
Direct
DirectLabor
LaborCost
Cost(DLC)
(DLC)==10 workers**₱656
10workers ₱656per
perDay
Day**124
124Total
TotalProduction Days==₱813,440
ProductionDays ₱813,440
Total
TotalCost (TC)==₱18,500
Cost(TC) ₱18,500Total ICC++₱813,440
TotalICC ₱813,440Total DLC==₱831,940
TotalDLC ₱831,940

Plan #2:
Plan #2:
In - House = 7 Full Time Employees * 5 units * 124 Total Production Days = ₱4,340
In - House = 7 Full Time Employees * 5 units * 124 Total Production Days = ₱4,340
Sub-contracting (SC) = 6,200 Total Demand Forecast - ₱4,340 Total In-House = ₱1,860
Sub-contracting (SC) = 6,200 Total Demand Forecast - ₱4,340 Total In-House = ₱1,860
Direct Labor Cost (DLC) = 7 Full Time Employees * ₱656 per Day * 124 Total Production Days = ₱569,408
Direct Labor Cost (DLC) = 7 Full Time Employees * ₱656 per Day * 124 Total Production Days = ₱569,408
Sub-contracting Cost (SCC) = ₱1,860 Total SC * ₱24 per unit = ₱44,640
Sub-contracting Cost (SCC) = ₱1,860 Total SC * ₱24 per unit = ₱44,640
Total Cost (TC) = ₱569,408 Total DLC + ₱44,640 Total SCC = ₱614,048
Total Cost (TC) = ₱569,408 Total DLC + ₱44,640 Total SCC = ₱614,048
Plan #3:
 Cost Incurred in Cost Incurred in
Month Basic Production Cost Increasing Decreasing Total
Production Production (Layoff) Cost
(Hiring)
January 900 * 1.6 * 82 = 118,080 ------- ------- ₱118,080

February 700 * 1.6 * 82 = 91,840 110 * 2 = 220 ₱92,060

March 800 * 1.6 * 82 = 104,960 110 * 1 = 110 ₱105,070

April 1,200 * 1.6 * 82 = 157,440 95 * 19 = 1,805 ₱159,245

May 1,500 * 1.6 * 82 = 196,800 95 * 11 = 1,122 ₱197,922

June 1,100 * 1.6 * 82 = 144,320 110 * 13 = 1,430 ₱145,750

Plan #3:

Cost Incurred in Cost Incurred in

Month Basic Production Cost Increasing Decreasing Total
Production Production (Layoff) Cost
(Hiring)
January 900 * 1.6 * 82 = 118,080 ------- ------- ₱118,080

February 700 * 1.6 * 82 = 91,840 110 * 2 = 220 ₱92,060

March 800 * 1.6 * 82 = 104,960 110 * 1 = 110 ₱105,070

April 1,200 * 1.6 * 82 = 157,440 95 * 19 = 1,805 ₱159,245

May 1,500 * 1.6 * 82 = 196,800 95 * 11 = 1,122 ₱197,922

June 1,100 * 1.6 * 82 = 144,320 110 * 13 = 1,430 ₱145,750