Michael Carrigg, Inc., is a disk drive manufacturer in need of an aggregate plan
ID: 407863 • Letter: M
Question
Michael Carrigg, Inc., is a disk drive manufacturer in need of an aggregate plan for July through December. The company has gathered the following data given in the tables. There are 8 hours of production per day. You manage a consulting firm down the street from Michael Carrigg, Inc.,and to get your foot in the door, you have told Mr. Carigg that you can do a better job at aggregate planning than his current staff. He said, "Fine. You do that, and you have a 1-year contract." To make good on your boast, you propose a new strategy. Hire 5 workers in August an 5 more in October, and subcontract to meet the rest of the demand. What will be the cost of this strategy? Fill in the table below. (Enter all responses as whole numbers. In the hire/fire column, use positive numbers for hires -- plus signs omitted; negative numbers for layoffs.) The total hiring cost = $ (Enter your response as a whole number) The total inventory carrying cost = $ (Enter your response as a whole number.) The total cost, excluding normal time labor costs, is = $ (Enter your response as a whole number.)Explanation / Answer
Answer:
To build a Constant Workforce plan, we need to look at the cumulative number of DVDs forecasted and DVDsproduced.
The first step is to determine how productive one employee is per month:if each DVD takes 4 hoursto produce, then one employee can make 2 DVDs per workday (which given that there are 20 workdays/month,each employee can produce 40 DVDs per month).
Now we can look at the cumulative demand & cumulative production and the ratio of the two to determine howmany employees will be needed.But what to do with that beginning inventory?
Since we already have 150DVDs on hand at the start of July, we really only need to produce 420 – 150 = 270 in July.
So, what is the maximum number of employees needed?
We need 14.58 employees and rounding up to 15, whichmeans that we’ll have to hire 3 people.And a good question is when should these employees be hired?
We only need 7 employees to cover the demand for July.Well, because we’re looking at the cumulative demand (andproduction), we need all 15 employees for the whole time period.Yes, some months we’ll be producing morethan we need, but we’ll use that extra production to cover those months when we won’t be producing enough tomeet demand.
Looking at the production and inventory levels:Monthly Production is the product of the number of employeesand the number of units produced by one worker and the Ending Inventory is the previous period’s endinginventory plus the monthly production minus the demand.For example, 600 units were produced in July, but weonly needed 250 (remember we already had 150 on hand), so the extra 350 went into inventory.