Mowers & Blowers Associates, Inc.
MBA Inc. assembles lawn mowers and snow blowers from subassemblies and component parts provided by reliable vendors. Both products (end items) utilize the same small engines, many of the same parts and require the same assembly time and employee labor skills.
On December 20, the Production Planning Committee of MBA Inc. is due to adopt an aggregate plan for the coming year. The available planning information is as follows:
Information: Demand Forecasts
Quarter Lawn Mowers Snow Blowers
Q – I 11,000 9,000
Q – II 16,000 7,000
Q – III 17,000 19,000
Q – IV 3,000 10,000
Quarter – I Beginning Inventory: Mowers 2600; blowers 1400
Output and Costs:
Regular Time $5.00 per unit
Overtime $7.50 per unit
Subcontract $10.00 per unit
Part Time $12.00 per unit
Inventory $4.00 per unit per quarter based on avg. inventory during each quarter
Backorders $8.00 per unit per period (based on backorders at end of period)
Hiring $100.00 per employee (Full-Time or Part-Time)
Layoff $500.00 per employee (no cost if Part-Time)
Production Rates:
Regular 500 units per Full-Time employee per quarter (of either unit)
Overtime up to 200 units per Full-Time employee per quarter (of either unit)
Temporary 400 units per Temporary employee per quarter (of either unit)
Subconract Maximum subcontract output available is 5200 units per quarter.
Production work force:
As of the first of the year, the production work force consists of 45 Full-Time employees.
Additional Assumptions:
1) Temporary employees may not work overtime
2) Assume 100% utilization of Full-Time employees on regular time and of Temporary employees at all times (i.e., all such employees on the payroll during a period produce at the rates shown under Production Rates).
3) Overtime utilization of Full-Time employees can be on an as needed basis subject to the limitation on maximum overtime output shown under Production Rates.
Given all of this planning information, develop a series of aggregate plans to meet the criteria presented in the following series of problems. All plans must include full costs and hiring/layoff actions, as needed. Show all plans using one of the worksheets at the end of this document.
A. Develop an aggregate plan which utilizes a level (constant) rate of output each quarter using only full-time employees without overtime. Ending inventory for quarter IV is 2000; this means, of course, that there will be no backorders at the end of quarter IV. Backorders may occur at the end of the other quarters.
If each shipping container for a completed mower or blower requires 6 cu. ft. of space, what is the maximum amount of cubic feet of space that would be needed in the finished goods warehouse if your plan 1-A is adopted? (Assume that sales and production occur at a steady, daily rate within each quarter.)
If the cost of each completed end item is $200.00, what is the maximum amount of capital that will be tied up in finished goods inventory during the year? (Continue with the assumption given for 1B.