Assignment # 2 Togo makes riding lawn mowers and tractors. The company\'s expect
ID: 424221 • Letter: A
Question
Assignment # 2 Togo makes riding lawn mowers and tractors. The company's expected quarterly demand is given below in the chart The company will have 300 mowers in inventory at the beginning number at the end of each month. Below is other critical data: of the month and desires to maintain at least that Production cost per unit $225 Inventory Carrying cost per quarter per unit -$50 (based on ending inventory) Hiring Cost per worker $450 Firing cost per worker $800 Beginning # of workers-50 Each worker can produce 110 units per quarter Complete the tables and calculate the cost of the two plans LEVEL Plan Quarter Demand Regular EndingWorkers Hire ire ProductionInventoryRequired 5000 9000 7000 9000 30,000 Total CHASE PLAN QuarterDemand Regular Ending Workers Hire Fire Production Inventory Required 5000 9000 9000 30,000 Total Which plan do you recommend and why?Explanation / Answer
Ending inventory = beginning inventory+production-demand
Level plan: Total production per quarter = 30,000/4 = 7,500
Production cost = 30,000*$225 = $6,750,000. Inventory cost = 6200*$50 = $310,000. Hiring cost = 18.18*$450 = $8,181.82
Thus total cost = 6,750,000+310,000+8181.82 = $7,068,181.82
Chase plan:
Production cost = 30,000*$225 = $6,750,000. Inventory cost = 1200*50 = 60,000. Hiring cost = 54.55*450 = 24,545.45. Firing cost = 22.73*800 = 18,181.81
Thus total cost = $6,750,00060,000+24,545.45+18,181.81 = $6,852,727.27
As the total costs are lower in case of chase plan I will recommend the chase plan.
Quarter Demand Production Ending inventory Workers required Hire Fire 1 5,000 7,500 2,800 68.18 18.18 0 2 9,000 7,500 1,300 68.18 0 0 3 7,000 7,500 1,800 68.18 0 0 4 9,000 7,500 300 68.18 0 0 Total 30,000 30,000 6,200 18.18 0