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The Austin, Texas plant of Computer Products produces disk units for personal and small business computers. Gerald Knox, the plantâs production planning director, is looking over next yearâs sales forecasts for these products and will be developing an aggregate capacity plan for the plant. The quarterly sales forecasts for the disk units are as follows:1st Quarter 2nd Quarter 3rd Quarter 4th Quarter2,000 1,980 2,340 2,160Ample machine capacity exists to produce the forecast. Each disk unit takes an average of 20 labor-hours. In addition, you have collected the following information:a. Inventory carrying cost is $100 per disk unit per quarter. The cost is applied to all units in inventory at the end of a quarter.b. The plant works the same number of days in each quarter, 12 five-day weeks, 6 hours per day.c. Beginning inventory is 200 disk units. These will be used to help satisfy the 1st Quarter demand.d. In a backlog situation, the customer will wait for his order to be filled but will expect a price reduction each quarter he waits. The backlog costs are $300 per disk for the first quarter the customer waits, $700 for the second quarter the customer waits, and $900 for the third quarter the customer waits. In filling orders, backlogged items will always be filled before current quarter items,e. The cost of hiring a worker is $800 while the cost of laying off a worker is $950.f. The straight time labor rate is $20 per hour for the first quarter and increases to $22 per hour in the second quarter.g. Overtime work is paid at time and a half (150%) of the straight time work.h. Outsourcing (contract work) is paid at the rate of $475 per disk unit for the labor and Computer Products provides the material.i. Demand during the fourth quarter of the prior year was 1,980 units. The demand for the first quarter of the next year (year following the year you are analyzing) is projected to be at the 1,980 unit level.Compare the following three sales and operations plans.i) Computer Products is considering the âchasingâ or âmatchingâ demand planning model for meeting the disk production. As workers are added to the workforce, all workers being considered do not qualify for one reason or another. So, the company will need to process more potential workers than are needed to match the demand. Historically, only 50% of the workers being considered are qualified. Hence the company needs to âprocessâ more potential workers. For those workers who are not qualified, there is still a cost the company incurs for processing them. This amounts to $650 per unqualified worker. For the workers who are hired, the cost is the $800 referenced in item e. above. Ignoring the material cost, what is the total cost to produce the disks for the year? All workers will be fully utilized each quarter, in other words, there is no under utilization.ii) As an alternative, the company will maintain a workforce capable of producing the demand during the fourth quarter of last year. If there are more workers in a quarter than required to produce the demand for that quarter, only the units required will be produced in that quarter and there will be underutilization. If demand is greater in a quarter than can be produced by the available workforce using straight time, the excess units will be outsourced. What is the total cost of this option, excluding the material cost?iii) As an alternative, the company will establish in quarter one and then maintain a workforce capable of producing 2,160 units in a quarter. If there are more workers in a quarter than required to produce the demand for that quarter, only the units required will be produced in that quarter and there will be underutilization. If demand is greater in a quarter than can be produced by the available workforce using straight time labor, the excess units will be backlogged until the next quarter when they will be produced using regular time labor and then overtime if there are not sufficient workers. What is the total cost of this option, excluding the material cost?
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