January February March April May June Totals

Beginning Inventory 400 450 375 275 225 275

Demand Forecast 1800 1500 1100 900 1100 1600 8000
Number of Working Days by Month 22 19 21 21 22 20 125

Costs
Materials $100.00 $ per unit
Inventory holding cost $1.50 $ per unit per month
Marginal cost of stockout $5.00 $ per unit per month
Marginal cost of subcontracting $20.00 $ per unit ($120 less $100 material cost)
Hiring and training cost $200.00 $ per worker
Layoff cost $250.00 $ per worker
Labor hours required per unit 5.0 hours per unit
Straight-line cost (first eight hours each day) $4.00 $ per hour
Overtime cost (time and a half) $6.00 $ per hour

Aggregate Production Planning Requirements

January February March April May June

Beginning Inventory 400 450 375 275 225 275
Demand Forecast 1,800 1,500 1,100 900 1,100 1,600
Safety Stock (.25 x Demand Forecast) 450 375 275 225 275 400
Production Requirement 1,850 1,425 1,000 850 1,150 1,725
Ending Inventory 450 375 275 225 275 400

Exhibits 16.4 - Costs of Four Production Plans

Production Plan 1: Exact Production; Vary Workforce

January February March April May June Total
Production Requirement 1,850 1,425 1,000 850 1,150 1,725
Production Hours Required 9,250 7,125 5,000 4,250 5,750 8,625
Working Days per Month 22 19 21 21 22 20
Hours per Month per Worker 176 152 168 168 176 160
Workers Required 53 47 30 25 33 54
New Workers Hired 0 0 0 0 7 21
Hiring Cost $0 $0 $0 $0 $1,475 $4,247 $5,722
Workers Laid Off 0 6 17 4 0 0
Layoff Cost (Workers Laid Off x $250) $0 $1,420 $4,278 $1,116 $0 $0 $6,815
Straight Time Cost $37,000 $28,500 $20,000 $17,000 $23,000 $34,500 $160,000
Total Cost $172,537

Production Plan 2: Constant Workforce; Vary Inventory and Stockout

January February March April May June Total
Beginning Inventory 400 8 -276 -32 412 720
Working Days per Month 22 19 21 21 22 20
Production Hours Available (Working Days per
7040 6080 6720 6720 7040 6400
Month x 8 Hr./Day x 40 Workers)*
Actual Production (Production Hours Available/5 1408 1216 1344 1344 1408 1280
Hr./Unit)
Demand Forecast (From Exhibit 16.3) 1800 1500 1100 900 1100 1600
Ending Inventory (Beginning Inventory + Actual 8 -276 -32 412 720 400
Production - Demand Forecast)
Shortage Cost (Units Short x $5) $0 $1,380 $160 $0 $0 $0 $1,540
Safety Stock (From Exhibit 16.4) 450 375 275 225 275 400
Units Excess (Ending Inventory - Safety Stock) 0 0 0 187 445 0
Inventory Cost (Units Excess x $1.50) $0 $0 $0 $281 $668 $0 $948
Straight Time Cost $28,160 $24,320 $26,880 $26,880 $28,160 $25,600 $160,000
*(Sum of Production Requirement in Exhibit 16.3 x 5
hr./unit)/(Sum of Production Hours Available x 8 hr./day) Total Cost 162,488
= (8,000 x 5)/(125 x 8) = 40

Production Plan 3: Constant Low Workforce; Subcontract

January February March April May June Total
Production Requirement 1,850 1,425 1,000 850 1,150 1,725
Working Day per Month 22 19 21 21 22 20
Production Hours Available (Working Day x 8
4,400 3,800 4,200 4,200 4,400 4,000
Hrs./Day x 25 Workers)*
Actual Production (Production Hours Available/5
880 760 840 840 880 800
hr.per Unit)
Units Subcontracted (Production Requirement -
970 665 160 10 270 925
Actual Production)
Subcontracting Cost (Units Subcontracted x
$19,400 $13,300 $3,200 $200 $5,400 $18,500 $60,000
$20)
Straight Time Cost $17,600 $15,200 $16,800 $16,800 $17,600 $16,000 $100,000

*Minimum production requirement. In this example,

April is minimum of 850 units. Number of workers Total Cost $160,000
required for April is (850 x 5)/(21 x 8) = 25

Production Plan 4: Constant Workforce; Overtime

January February March April May June Total
Beginning Inventory 400 0 0 177 553 791
Working Days per Month 22 19 21 21 22 20 125
Production Hours Available (Working Days x 8
6,688 5,776 6,384 6,384 6,688 6,080
Hr./Day x 38 Workers)
Regular Shift Production (Production Hours 1,338 1,155 1,277 1,277 1,338 1,216
Available / 5 hrs. per Unit)
Demand Forecast (From Exhibit 16.3) 1,800 1,500 1,100 900 1,100 1,600 8000
Units Available before Overtime (Beginning
Inventory + Regular Shift Production - Demand -62 -345 177 553 791 407
Forecast)
Units Overtime 62 345 0 0 0 0
Overtime Cost (Units Overtime x $6/Hr x 5 hr./Unit) $1,860 $10,350 $0 $0 $0 $0 $12,210
Safety Stock (From Exhibit 16.3) 450 375 275 225 275 400
Units Excessive (Units Available before Overtime -
0 0 0 328 516 7
Safety Stock)
Inventory Cost (Units Excessive x $1.50) $0 $0 $0 $493 $774 $10 $1,277
Straight Time Cost $26,752 $23,104 $25,536 $25,536 $26,752 $24,320 $152,000
Total Cost $165,487
Exhibit 16.7 Actual Demand Requirement for Full-Time Direct Employees and Full-Time-Equivalent (FTE) Part-Time Employees

Jan. Feb. Mar. Apr. May Jun Jul Aug Sep Oct Nov Dec Total
Days 22 20 21 22 21 20 21 21 21 23 18 22 252
Full-time employees 66 28 130 90 195 290 325 92 45 32 29 60
Full-time days* 1,452 560 2,730 1,980 4,095 5,800 6,825 1,932 945 736 522 1,320 28,897
Full-time-equivalent
41 75 72 68 72 302 576 72 0 68 84 27
part-time employees
FTE days 902 1,500 1,512 1,496 1,512 6,040 12,096 1,512 0 1,564 1,512 594 30,240

* Full-time Days are derived by multiplying the number of days in each month by the number of workers.
F u ll- t im e e q u iv a le n t e m p lo y e e s r e q u ir e d

Monthly Requirement for Full-Time Direct-Labor Employees (Other than Key Personnel) and Full-Time-Equivalent Part-Time Employees

600

500

400

300

200

100

0
Jan. Feb. Mar. Apr. May Jun Jul Aug Sep Oct Nov Dec

PTE part-time Full-time

Exhibit 16.8 Three Possible Plans for the Parks and Recreation Department

Alternative 1: Maintain 116 full-time regular direct workers, Schedule work during off-seasons to level workload throught the
year. Continue to use 120 full-time-equivalent (FTE) part-time employees to meet high demand periods.

Wages
Days per Year Hours (Employees (FT, $4.45; PT, Fringe Benefits Adm. Cost
Costs (Exhibit 14.8) x Days x 8 hours) $4.03) (FT, 17%; PT, 11%) (FT, 20%; PT, 25%)
116 full-time regular employees 252 233,856 $1,040,659 $176,912 $208,132
120 part-time employees 252 241,920 $974,938 $107,243 $243,734
Total cost = $2,751,619 $2,015,597 $284,155 $451,866

Alternative 2: Maintain 50 full-time regular direct workers and the present 120 FTE part-time employees. Subcontract jobs
releasing 66 full-time regular employees. Subcontract cost, $1,100,000
 Wages
Days per Year Hours (Employees (FT, $4.45; PT, Fringe Benefits Adm. Cost Subcontract
Costs (Exhibit 14.8) x Days x 8 hours) $4.03) (FT, 17%; PT, 11%) (FT, 20%; PT, 25%) Cost
50 full-time employees 252 100,800 $448,560 $76,255 $89,712 $1,100,000
120 FTE part-time employees
Subconstracting Cost 252 241,920 $974,938 $107,243 $243,734
Total Cost = $3,040,443 $1,423,498 $183,498 $333,446 $1,100,000

Alternative 3: Subcontract all jobs previously by 116 full-time regular employees. Subcontract cost $ 1,600,000.
Subcontract all jobs previously performed by 120 full-time-equivalent part-time employees. Subcontract cost $1,850,000

Costs Subcontract Cost

0 full-time employees
0 part-time employees
Subcontract full-time jobs $1,600,000
Subcontract part-time jobs $1,850,000
Total Cost $3,450,000
DATOOS

LINEAS ACTUALES 10

CADA LINEA 6 TRABAJADORES

TIEMPO X LINEA 7.5 HORAS

TRABAJADOR 8 HORAS

SE PUEDE TRABAJAR 2 HORAS EXTRA

SALARIO 20 TURNO REGULAR

30 X HORA EXTRA

COSTO DE TENER INVENTARIO 1 X CAJA X AÑO

0.019230769 X CAJA X SEMANA

COSTO DE INVENTARIO AGOTADO 2.4 X CAJA

COSTO DE UN NUEVO EMPLEADO 5000 X PERSONA

DESPIDO DE EMPLEADO 3000 X PERSONA

PLANIFICACION DE LA PRODUCCION

1 2 3
INVENTARIO INICIAL 200 338 385
INVENTARIO FINAL 338 385 408
UNIDADES A VENDER 2000 2200 2500
UNIDADES A PRODUCIR 2138 2247 2523

PLAN DE PRODUCCION 1: PRODUCCION EXACTA, MO VARIABLE

1 2 3

UNIDADES A PRODUCIR 2138 2247 2523

HORAS DE PN REQUERIDAS 4751.1 4993.3 5606.7
HORAS POR PERIODO 682.5 682.5 682.5
LINEAS REQUERIDAS 7.0 7.3 8.2
LINEAS REQUERIDOS ENTERO 7.0 8.0 9.0
TRABAJADORES 42.0 48.0 54.0
NUEVAS TRABAJADORES 6.0 6.0
COSTO CONTRATACION $ 210,000 $ 30,000 $ 30,000
DESPIDO TRABAJADORES
COSTO DESPIDO
COSTO DEL TIEMPO NORMAL $ 95,022 $ 99,867 $ 112,133

PLAN 2 1 2 3
LINEAS MINIMAS 7
TRABAJADORES CONSTANTES 42
COSTO DE CONTRATACION $ 210,000

HORAS TRABAJADAS 4777.5

PRODUCCION REAL 2149875 2149875 2149875
INVENTARIO INICIAL 200000 349875 299750
UNIDADES A VENDER 2000000 2200000 2500000
INVENTARIO FINAL 349875 299750 -50375

COSTO DEL EXCESO $ 6,728.37 $ 5,764.42

COSTO DE LA ESCASEZ $ 120,900.00
COSTO DE OPERACIÓN MANO DE OBRA $ 95,550.00 $ 95,550.00 $ 95,550.00

PLAN 3 MO CONSTANTE CON HORAS EXTRAS 1 2 3

LINEAS MINIMAS 7
TRABAJADORES CONSTANTES 42
COSTO DE CONTRATACION $ 210,000

HORAS TRABAJADAS 4777.5

PRODUCCION REAL 2149875
INVENTARIO INICIAL 200000 349875 299750
UNIDADES A VENDER 2000000 2200000 2500000
INVENTARIO FINAL 349875 299750 -50375

HORAS EXTRAS 0 111.9444444444

COSTO HORAS EXTRAS 0 $ 3,358.33
COSTO DE OPERACIÓN $ 95,550.00 $ 95,550.00 $ 95,550.00
BAJADORES PRODUCCION X LINEA 450 CAJAS X HORA
PRODUCCION X LINEA 0.0022222222 horas x caja
NO REGULAR

JA X SEMANA
produccion 33750 x dia
produccion por periodo 12285000
12285

si trabajo full
pasado a unidades

4 5
408 338
338
2650 2200
2580 1862 11350

4 5 TOTAL

2580 1862
5733.3 4137.8
682.5 682.5
8.4 6.1
9.0 7.0
54.0 42.0
0.0
$ - $ 270,000
12.0
$ 36,000 $ 36,000
$ 114,667 $ 82,756 $ 504,444
$ 810,444 COSTO TOTAL

4 5 TOTAL
 $ 210,000

2149875 2149875
-50375 -550500
2650000 2200000
-550500 -600625

$ 12,492.79
$ 1,321,200.00 $ 1,441,500.00 $ 2,883,600.00
$ 95,550.00 $ 95,550.00 $ 477,750.00
$ 3,583,842.79 COSTO TOTAL

4 5 TOTAL

$ 210,000

-50375 -550500
2650000 2200000
-550500 -600625

1223.3333333333 1334.7222222222
$ 36,700.00 $ 40,041.67 $ 80,100.00
$ 95,550.00 $ 95,550.00 $ 477,750.00
$ 767,850.00 COSTO TOTAL
1 2 3 4 5
PRONOSTICO DE DEMANDA 2000 2200 2500 2650 2200

INVENTARIO FINAL 338 385 408 338

INVENTARIO INICIAL 200

cajas
unidades de 1000

27300 horas de trabajo posibles

12285000 cajas
12285 cajas de mil
$ 40,050.00 COSTO X TERCIERIZAR

$ 727,800.00 COSTO TOTAL TERCIERIZANDO