HW 7

1. A swimwear manufacturer wants to determine the best production plan for next year. Demand for
swimwear follows a seasonal pattern, as shown here. Given the following costs and demand
forecasts, test these four strategies for meeting demand:
a) level regular production with overtime and subcontracting, and no hiring/firing,
b) level regular production with backorders as needed,
c) chase demand by varying the workforce level,
and d) 3000 units regular production and as much overtime, and subcontracting production as
needed from April through September, and chase demand by using only regular production in other
months.
Determine the cost of each strategy. Which strategy would you recommend?

Month Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Demand 1000 500 500 2000 3000 4000 5000 3000 1000 500 500 3000
Forecast

Beginning workforce 8 workers

Subcontracting capacity Unlimited
Overtime capacity 2000 units/month
Production rate per worker 250 units/month
Regular wage rate $15 per unit
Overtime wage rate $25 per unit
Subcontracting cost $30 per unit
Hiring cost $100 per worker
Firing cost $200 per worker
Holding cost $0.50 per
unit/month
Backordering cost $10 per unit/month

2. Given the following estimates of demand requirements:

April May June July August September
1,000 1,200 1,400 1,800 1,800 1,600
Assuming inventory carrying costs of $25 per unit per month, and zero ending inventory, evaluate
these four plans on an incremental cost basis and make a recommendation.
Plan A. Produce at a steady rate (equal to minimum requirements) of 1,000 units per month and
subcontract additional units at a $60 per unit premium cost.
Plan B. Vary the workforce, which performs at a current production level of 1,300 units per month.
The cost of hiring additional workers is $3,000 per 100 units produced. The cost of layoffs is $6,000
per 100 units cut back.
Plan C. Keep the current workforce steady at a level producing 1,300 units per month. Subcontract
the remainder to meet demand. Assume for this plan only that 300 units remaining from March are
available in April.
Plan D. Keep the current workforce at a level capable of producing 1,300 units per month. Permit a
maximum of 20% overtime at a premium of $40 per unit. Assume that warehouse limitations permit
no more than a 180-unit carryover from month to month. This plan means that any time inventories
reach 180, the plant is kept idle. Idle time per unit is $60. Any additional needs are subcontracted at
a cost of $60 per incremental unit.

3. HQ Mechanic puts together foot pedal assemblies using components they buy from outside
suppliers. Below is the bill of material (BOM) for the foot pedal assembly.
Some foot pedal assemblies are used in production, many are sold to other manufacturers,
and the rest are sold as replacements.

Foot pedal assembly

Pedal Spindle Acorn

Body Nut*
* 2 needed here
Pedal Top Acorn Pedal
Nut Bottom

a) Complete the master production schedule for foot pedal assemblies, shown below.

On-hand inventory at end of December = 700 Foot pedal assemblies

Month / ******** January ****************** February **********

Week 1 2 3 4 5 6 7 8
Forecast Demand 7000 7000 7000 7000 7700 7700 8400 8400
Orders Booked 6090 4830 3850 7700 2926 1694 2100 1260
Projected on-hand
inventory
Master schedule 28000 0 0 0 15400 0 16800 0
Available-to-promise

b) Complete the MRP for foot pedal assemblies, based on the above MPS quantities. On hand
inventory at the end of December are given for each part below.
(NOTE: The quantity due in Week 1 of the MPS has already been taken care of. There is no need
to generate MRP transactions based on it; you can assume that all the material ordering and
manufacturing steps have been completed for this job.)

WEEK
1 2 3 4 5 6 7
*** Pedal Assemblies ***
LT (weeks) = 1 MPS Due Date 28000 0 0 0 15400 0 16800
Start Assembly

Pedal Body Gross Reqmts.

LT (weeks ) = 1 Sched. Receipts
Proj. On Hand 0
Net Reqmts.
Min. Order = 1 Planned Receipts
(lot-for-lot) Planned Order

Spindle Gross Reqmts.

LT (weeks ) = 5 Sched. Receipts
 Proj. On Hand 0
Net Reqmts.
Min. Order = 2000 Planned Receipts
Planned Order

Acorn Nut Gross Reqmts.

LT (weeks ) = 1 Sched. Receipts
Proj. On Hand 988
Net Reqmts.
Min. Order = 30,000 Planned Receipts
Planned Order

Pedal Top Gross Reqmts.

LT (weeks ) = 2 Sched. Receipts
Proj. On Hand 0
Net Reqmts.
Min. Order = 5000 Planned Receipts
Planned Order

Pedal Bottom Gross Reqmts.

LT (weeks ) = 2 Sched. Receipts
Proj. On Hand 0
Net Reqmts.
Min. Order = 1000 Planned Receipts
Planned Order

4. The Wicked Witch Wisk Company manufactures a line of broomsticks. The most popular is the
36-inch model, and the sales department has prepared a forecast for eight weeks. The opening
inventory is 17. As a master scheduler, you must prepare an MPS. The brooms are manufactured in
multiples of 100 units.
 Item: Ordering Policy: Multiples of 100 units
Broomstick

Quantity Weeks
On hand: 17 1 2 3 4 5 6 7 8
Forecast 40 40 45 45 50 50 55 55

Customer 38 27 20 5
Orders
(booked)
Projected
On-hand
Inventory
MPS

Available-to-
Promise
(ATP)
Inventory

5. The MPS planner at ABC Motors uses MPS time-phased records for planning end item
production. The planner is currently working on a schedule for the P24, one of ABC’s top-selling
motors. The planner uses a production lot size of 70 for the P24 motor.

On hand = 20 Week
1 2 3 4 5 6 7 8
Forecast 30 30 30 40 40 40 45 45
Customer Orders 33 18 14 5
Projected on hand
MPS
Available to promise

a. Complete the MPS time-phased record for product P24.

b. Can ABC accept the following orders? Update the MPS time-phased record for accepted orders.

Order Amount Desired week

1 40 4
2 30 6
3 30 2
4 25 3