A concrete block making company is developing an aggregate capacity plan from the following sales forecast for its 6" and 8" concrete blocks.
Product
Sales Forecasts (Concrete Blocks)
6" Block
1st Quarter (2,000 blocks)
2nd Quarter (1,500 blocks)
3rd Quarter (1,600 blocks)
4th Quarter (1,800 blocks)
8" Block
1st Quarter (1,200 blocks)
2nd Quarter (1,000 blocks)
3rd Quarter (800 blocks)
4th Quarter (1,000 blocks)
Ample machine capacity exists to produce the forecast. Each 6" concrete block takes an average of 20 labour-hours while each 8" concrete block takes an average of 15 labour-hours.
(a) Compute the aggregate number of labour-hours in each quarter.
(b) If each worker works 520 hours per quarter, how many workers will be required in each quarter?
(c) It costs $1,000 to hire a worker and $500 to lay off a worker, and inventory carrying cost is $100 for each 6" concrete block and $100 for each 8" concrete block (this means that if one 6" concrete block were held in inventory for a year, it would cost $100 for finance charge, insurance, warehousing expense, etc.). The plant works the same number of days in each quarter, 13 five-day weeks.
Evaluate two aggregate plans for next year - level strategy with inventory and chase strategy. Beginning inventory is 275 for 6" concrete blocks and 200 for 8" concrete blocks in the level capacity plan and zero for both types of concrete blocks in the matching demand plan. Assume that the quarterly demand pattern repeats from year to year.