Problem: Dundas Bike Components Inc. of Wheelville. Illinois, manufactures bicycle wheels in two different sizes for the Big Bike Co. assembly plant located across town. David Dundas, the firm's owner-manager, has just received Big Bike's order for the next six months.
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Nov.
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Dec.
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Jan.
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Feb.
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Mar.
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Apr.
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20-Inch Wheels
24-Inch Wheels
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1.000
500
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900
500
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600
300
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700
500
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1,100
400
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1,100
600
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1) Currently Dundas employs 28 full-time, highly skilled employees, each of whom can produce 50 wheels per month. Because skilled labor is in short supply in the Wheelville area, David would like to develop one pure level-output plan. There is no inventory of finished wheels on hand at present. but David would like to have 300 on hand at the end of April. Big Bike will tolerate back orders of up to 200 units per month. Show your level plan in tabular form. The amount produced using overtime should be the same except for the last month. It is assumed that it is possible to develop just one aggregate plan for both sizes of wheels. Please consider two options: keep the same number of employees and use the overtime if necessary. or just hire extra employees if necessary.
2) Calculate the total annual cost of your plan using these costs:
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Regular
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$5.00/unit
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Hiring
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$300/person
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Overtime
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$7.50/unit
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Layoff
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$400/person
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Part-time
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N/A
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Inventory
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$1.00/unit/month
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Subcontract
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N/A
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Back order
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$6.00/unit/month
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