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Duestion 2 mbo manufactures bicye

Duestion 2 mbo manufactures bicye

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 2 Jumbo manufactures bicycles for all ages. The demand forecast for the coming year is as shown in Table 1. Jumbo currently has 200 employees and the capacity of the inventory is limited to 5,000 bicycles. Employees are paid s10 per hour for regular time and S15 per hour for overtime. Each bicycle requires two hours of work from one employee. The plant works 20 days a month and eight hours a day of regular time. Overtime is restricted to a maximum of 20 hours per employee per month. In order to satisfy the demand, Jumbo may hire (recruit) and lay off (fire) workers in addition to subcontracting (manufactured outside). Hiring costs $300/worker. Layoff costs $500/worker and a bicycle costs $ 65/unit if subcontracted. The number of hired workers cannot exceed 10% of the existing workers and there are no limits on subcontracting. Defect bicycles are estimated to 5% of the production each month. Each bicycle uses $35 of material. Carrying a bicycle in inventory from one month to the next costs $4. Month Demand Month Demand January 12,000 July 24,000 February 11,000 August 20,000 March 14,000 September 15,000 April 20,000 October 10,000 May 25,000 November 11,000 June 27,000 December 10,000 Table 1: Anticipated Monthly Demand at Jumbo Jumbo starts with 5,000 bicycles in inventory and wants to end the year with 4,500 bicycles in inventory. Bicycles are currently sold to retailers for S80 cach. Jumbo is in the process of making its production. What is the optimal production plan?
Transcribed Image Text:Question 2 Jumbo manufactures bicycles for all ages. The demand forecast for the coming year is as shown in Table 1. Jumbo currently has 200 employees and the capacity of the inventory is limited to 5,000 bicycles. Employees are paid s10 per hour for regular time and S15 per hour for overtime. Each bicycle requires two hours of work from one employee. The plant works 20 days a month and eight hours a day of regular time. Overtime is restricted to a maximum of 20 hours per employee per month. In order to satisfy the demand, Jumbo may hire (recruit) and lay off (fire) workers in addition to subcontracting (manufactured outside). Hiring costs $300/worker. Layoff costs $500/worker and a bicycle costs $ 65/unit if subcontracted. The number of hired workers cannot exceed 10% of the existing workers and there are no limits on subcontracting. Defect bicycles are estimated to 5% of the production each month. Each bicycle uses $35 of material. Carrying a bicycle in inventory from one month to the next costs $4. Month Demand Month Demand January 12,000 July 24,000 February 11,000 August 20,000 March 14,000 September 15,000 April 20,000 October 10,000 May 25,000 November 11,000 June 27,000 December 10,000 Table 1: Anticipated Monthly Demand at Jumbo Jumbo starts with 5,000 bicycles in inventory and wants to end the year with 4,500 bicycles in inventory. Bicycles are currently sold to retailers for S80 cach. Jumbo is in the process of making its production. What is the optimal production plan?
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