Chapter 13, Problem 14P

a.

Summary Introduction

Interpretation:

The development of the hybrid aggregate plan using the initial workforce which is supplemented by the overtime using the cost of the plan.

Concept Introduction:

The calculation of the workforce (W) required using the following formula:

  $W=\left(\frac{\text{Production rate per period}\times \text{Labor standard}}{\text{Regular time available per period}}\right)$

The overtime required hours can be calculated using the following formula:

  $\text{Overtime}=\text{ Required hours}-\text{Available hours}$

b.

Summary Introduction

Interpretation:

The calculation of the cost in the second alternative plan.

Concept Introduction:

The costs of this plan can be calculated using the following formulas, as shown below:

1. Backorder costs (Cb):

  $C_b=\text{Black-order Quantity}\times \text{Black-order Cost}$

2. Holding costs (Ch):

  $C_h=\text{Inventory}\times \text{Holding Cost per unit}$

3. Labor cost (CL):

  $C_L=\text{Production rate}\times \text{No}\text{. of periods}\times \text{Unit production time}\times \text{Cost per hour}$

4. Total cost (C):

  $C=C_b+C_h+C_L$

c.

Summary Introduction

Interpretation:

The calculation of the cost in third alternative plan.

Concept Introduction:

The costs of this plan can be calculated using the following formulas, as shown below:

1. Backorder costs (Cb):

  $C_b=\text{Black-order Quantity}\times \text{Black-order Cost}$

2. Holding costs (Ch):

  $C_h=\text{Inventory}\times \text{Holding Cost per unit}$

3. Labor cost (CL):

  $C_L=\text{Production rate}\times \text{No}\text{. of periods}\times \text{unit production time}\times \text{cost per hour}$

4. Total cost (C):

  $C=C_b+C_h+C_L$

d.

Summary Introduction

Interpretation:

The evaluation of the plan in terms of cost, customer service, operations and human resources.

Concept Introduction:

The customer demand is being met, but costs are $81,000 over the costs of the hiring and firing plan in Plan 3.