Mary Rhodes: Operations Manager at Kansas Furniture Aggregate Planning Assignment Answers
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Mary Rhodes: Operations Manager at Kansas Furniture Aggregate Planning Assignment
Mary Rhodes, operations manager at Kansas Furniture, has received the following estimates of demand requirements:
Assuming stockout costs for lost sales of $100 per unit, inventory carrying costs of $25 per unit per month, and zero beginning and ending inventory, evaluate these two plans on an incremental cost basis:
a) Plan A: Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and subcontract additional units at a $60 per unit per premium cost.
|$ 8 800|
|Period||Demand||Production||End of period inventory||Sub contract units||Inventory cost||Sub contract cost|
|Total Cost||$ 168 000|
b) Plan B: Vary the workforce, which performs at a current production level of 1,300 units per month. The cost of hiring additional workers is $3,000 per 100 units produced. The cost of layoffs is $6,000 per 100 units cut back.
|Month||Demand||Production||Hire||Layoff||Hire Cost||Layoff Cost|
|Total Cost||$ 54000|
Mary Rhodes also considering two more mixed strategies. Using the above data and compare plans C and D with plans A and B and make a recommendation.
a) Plan C: Keep the current workforce steady at a level producing 1,300 units per month. Subcontract the remainder to meet demand. Assume that 300 units remaining from June are available in July.
b) Plan D: Keep the current workforce at a level capable of producing 1,300 units per month. Permit a maximum of 20% overtime at a premium of $40 per unit. Assume that warehouse limitations permit no more than a 180-unit carryover from month to month. This plan means that any time inventories reach 180, the plant is kept idle time per unit is $60. Any additional needs are subcontracted at a cost of $60 per incremental unit.
Your manager, Mr Fauzi, projects the firm’s aggregate planning demand requirements over the next 6 months as follows:
You are required to consider a few new production plans with the following information:
|December demand||1,600 units|
|December production rate||1,600 units|
|Cost of lost sales (stockout)||RM100 per unit|
|Cost of holding inventory||RM20 per unit per month|
|Cost of hiring workers||RM50 per unit|
|Cost of laying off workers||RM75 per unit|
|Cost of subcontracting||RM75 per unit|
- Plan A: Vary the workforce level (chase strategy) by producing the quantity demanded in the prior month. Evaluate this plan.
- Plan B: Produce at a constant rate of 1,400 units per month, which will meet the minimum demands. Then use subcontracting to subcontract to meet the rest of the demand. Evaluate this plan.
- Plan C: Keep stable workforce by maintaining a constant production rate equal to average requirements and allow varying inventory levels. Evaluate this plan.
- Plan D: Keep the current workforce stable at producing 1,600 units per month and subcontract to meet the rest of the demand. Evaluate this plan.