Question 1: The company is considering using overtime subject to a maximum of 25 percent of regular-time ours.
What is the average cost per unit if the work force is maintained at a level so that overtime can be used the maximum of 2% of regular hours during the peak period in period 5?
Question 2: The company wants to determine the cost of meeting the demand by using a mixed strategy which involves changes in the number of employees and the use of ov ertime work. To keep from adding too many temporary employees during the peak demand period, the company will use overtime equal to up to 25 percent of the regular-time hours available. company has 22 employees at the end of the current year (i.e. at the beginning of period 1 of the following year which is being planned), and wants to end period 6 of the planning year with the same number of employees, i.e. 22 employees. It costs $400 to hire and $500 to lay off an employee. The company begins the planning year with no inventory.
If at least 50% of a new employee’s regular-time capacity could be utilized during the current period as well as the next period, it will add an employee, otherwise overtime will be used. The company will continue to add employees as required until the maximum employment level as dictated by the constraint of using overtime subject to a maximum of 25 percent of regular-time hours during the peak period, i.e. period 5.
Once the maximum employment level is reached, overtime will be used and no more employees are added.
a) Find the employment level for each bimonthly period.
b) Find the total pay’r/oll-related costs for the year.
c) hat cost per unit results from these payroll-related costs? (Ans. $126 per unit)