Reference no: EM13727319
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Excel - Must show all formulas
Unit 2 Individual Project 3-4 pages
A company produces to a seasonal demand, with the forecast for the next 12 months as given below.
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Month
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Demand
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January
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600
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February
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700
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March
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800
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April
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700
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|
May
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600
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June
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500
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July
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600
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August
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700
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September
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800
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October
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900
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November
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700
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December
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600
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The present labor force can produce 500 units per month. Each employee added can produce an additional 20 units per month and is paid $1000 per month. The cost of materials is $30 per unit. Overtime can be used at the usual premium of time and a half for labor up to a maximum of 10 percent per month. Inventory-carrying cost is $50 per unit per year. Changes in production level cost $100 per unit due to hiring, line changeover costs, and so forth. Assume 200 units of initial inventory. Extra capacity may be obtained by subcontracting at an additional cost of $15 per unit over and above the company's producing them itself on regular time.
Provide a detailed cost breakdown for using a level vs. a chase strategy to meet the increased demand.
Which strategy do you recommend?
How much savings would result from the plan you recommend?
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