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-imum inventory of 100 units at all times. At present they are carrying 500 wheel- barows in inventory and they want to have the same number in stock at the end of te pianning period. Maximum production capacity is 1500 units per period in regular time and the piant is currently producing 800 units per period. Extra production, to a maximum of 100 units per period, can be added by working overtime. The overtime premium is $4 a unit more than regular time production. Some work can be subcontracted, but the subcontractor has limited facilities and can produce only 100 units per period. The cost of subcontracting adds $6 to the normal cost of a wheelbarrow. The rate of production can be changed at a cost of $6 a unit, which includes costs of hiring, train- ing, and layoff. CASE ANALYSIS As the new materials manager you have been asked to develop a production plan for the next year that will meet the company's objectives and minimize the costs in- volved. Are there any other considerations aside from minimizing cost?

-imum inventory of 100 units at all times. At present they are carrying 500 wheel- barows in inventory and they want to have the same number in stock at the end of te pianning period. Maximum production capacity is 1500 units per period in regular time and the piant is currently producing 800 units per period. Extra production, to a maximum of 100 units per period, can be added by working overtime. The overtime premium is $4 a unit more than regular time production. Some work can be subcontracted, but the subcontractor has limited facilities and can produce only 100 units per period. The cost of subcontracting adds $6 to the normal cost of a wheelbarrow. The rate of production can be changed at a cost of $6 a unit, which includes costs of hiring, train- ing, and layoff. CASE ANALYSIS As the new materials manager you have been asked to develop a production plan for the next year that will meet the company's objectives and minimize the costs in- volved. Are there any other considerations aside from minimizing cost?

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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-mum inventory of 100 units at all times. At present they are carrying 500 wheel- barows in inventory and they want to have the same number in stock at the end of ie planning period. Maximum production capacity is 1500 units per period in regular time and the plant is currently producing 800 units per period. Extra production, to a maximum of 100 units per period, can be added by working overtime. The overtime premium is $4 a unit more than regular time production. Some work can be subcontracted, but the subcontractor has limited facilities and can produce only 100 units per period. The cost of subcontracting adds $6 to the normal cost of a wheelbarrow. The rate of production can be changed at a cost of $6a unit, which includes costs of hiring, train- ing, and layoff. CASE ANALYSIS As the new materials manager you have been asked to develop a production plan for the next year that will meet the company's objectives and minimize the costs in- volved. Are there any other considerations aside from minimizing cost?
Transcribed Image Text:-mum inventory of 100 units at all times. At present they are carrying 500 wheel- barows in inventory and they want to have the same number in stock at the end of ie planning period. Maximum production capacity is 1500 units per period in regular time and the plant is currently producing 800 units per period. Extra production, to a maximum of 100 units per period, can be added by working overtime. The overtime premium is $4 a unit more than regular time production. Some work can be subcontracted, but the subcontractor has limited facilities and can produce only 100 units per period. The cost of subcontracting adds $6 to the normal cost of a wheelbarrow. The rate of production can be changed at a cost of $6a unit, which includes costs of hiring, train- ing, and layoff. CASE ANALYSIS As the new materials manager you have been asked to develop a production plan for the next year that will meet the company's objectives and minimize the costs in- volved. Are there any other considerations aside from minimizing cost?
Sangster Manufacturing makes a line of wheelbarrows consisting of three models: 4 cubic feet, 3 cubic feet, and 2 cubic feet. While the demand for each model varies, the same work centers are used in making each model. As well, some of the parts are common. For planning purposes Sangster uses a four-week period. This provides for 13 periods of four weeks for the year. Based on past demand they have developed the following forecast for the next year: Period Demand Forecast Period Demand Forecast 500 8 1500 600 1000 3. 900 10 800 4. 1200 11 700 1400 12 600 1600 13 400 1800 The cost of carrying inventory is calculated at $2 per unit per period. Because wheelbarrows are a common item and there is a lot of competition, the company feels that a stockout will result in lost sales. They estimate that the cost of a lost sale is approximately $20 a wheelbarrow. Consequently, it is company policy to cany a
Transcribed Image Text:Sangster Manufacturing makes a line of wheelbarrows consisting of three models: 4 cubic feet, 3 cubic feet, and 2 cubic feet. While the demand for each model varies, the same work centers are used in making each model. As well, some of the parts are common. For planning purposes Sangster uses a four-week period. This provides for 13 periods of four weeks for the year. Based on past demand they have developed the following forecast for the next year: Period Demand Forecast Period Demand Forecast 500 8 1500 600 1000 3. 900 10 800 4. 1200 11 700 1400 12 600 1600 13 400 1800 The cost of carrying inventory is calculated at $2 per unit per period. Because wheelbarrows are a common item and there is a lot of competition, the company feels that a stockout will result in lost sales. They estimate that the cost of a lost sale is approximately $20 a wheelbarrow. Consequently, it is company policy to cany a
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