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This is 2 questions that go with each other, please answer all questions in word and complete formulas in Excel Sheet(s) to show work.Â
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4. FlexMan, an electronics contract manufacturer, uses its Topeka, Kansas, facility to produce two product categories: routers and switches. Consultation with customers has indicated a demand forecast for each category over the next 12 months (in thousands of units) to be as shown in Table 8-10. Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on the production line. The plant operates 20 days a month, eight hours each day. Production of a router takes 20 minutes, and production of a switch requires 10 minutes of worker time. Each worker is paid $10 per hour with a 50 percent premium for any overtime. The plant currently has 6,300 employees. Overtime is limited to 20 hours per employee per month. The plant currently maintains 100,000 routers and 50,000
switches in inventory. The cost of holding a router in inventory is $2 per month, and the cost of holding a switch in inventory is $1 per month. The holding cost arises because products are paid for by the customer at existing market rates when purchased. Thus, if FlexMan produces early and Table 8-10 Demand Forecast for FlexMan holds in inventory, the company recovers less given the rapidly dropping component prices.
a. Assuming no backlogs, no subcontracting, no layoffs, and no new hires, what is the optimum production schedule for FlexMan? What is the annual cost of this schedule? What inventories does the optimal production schedule build? Does this seem reasonable?
b. Is there any value for management to negotiate an increase of allowed overtime per employee per month from 20 hours to 40? What variables are affected by this change?
c. Reconsider parts (a) and (b) if FlexMan starts with only 5,900 employees. Reconsider parts (a) and (b) if FlexMan starts with 6,700 employees. What happens to the value of additional overtime as the workforce size decreases?
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TABLE 8-10
Month          Router Demand           Switch Demand
January                1,800                              1,600
February              1,600                               1,400
March                   2,600                              1,500
April                     2,500                              2,000
May                        800                               1,500
June                     1,800                               900
July                       1,200                                700
August                 1,400                                800
September          2,500                               1,400
October              2,800                               1,700
November           1,000                                 800
December           1,000                                 900
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5. Reconsider the FlexMan data from Exercise 4. The firm is considering the option of changing workforce size with demand. The cost of hiring a new employee is $700 and the cost of a layoff is $1,000. It takes an employee two months to reach full production capacity. During those two months, a new employee provides only 50 percent productivity. Anticipating a similar demand pattern next year, FlexMan aims to end the year with 6,300 employees.
a. What is the optimal production, hiring, and layoff schedule? What is the cost of such a schedule?
b. If FlexMan could improve its training so that new employees achieve full productivity right away, how much improvement in annual cost would the company see? How is the hiring and layoff policy during the year affected by this change?