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FlexMan produces routers and switches at its Kansas facility. It forecasts demand over the next 12 months and currently employs 6,300 workers. The document asks to determine the optimal production schedule assuming no changes to staffing or capacity, and to consider if allowing more overtime could provide value. Increasing overtime may be more beneficial if staffing decreases, as it could help meet demand without hiring more employees.

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370 views1 page

Dsvesrvceswcdsac

FlexMan produces routers and switches at its Kansas facility. It forecasts demand over the next 12 months and currently employs 6,300 workers. The document asks to determine the optimal production schedule assuming no changes to staffing or capacity, and to consider if allowing more overtime could provide value. Increasing overtime may be more beneficial if staffing decreases, as it could help meet demand without hiring more employees.

Uploaded by

Bagas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Exercise Aggregate

1. FlexMan, an electronics contract manufacturer, uses its Topeka, Kansas, facility to


produce two product categories: routers and switches. Consultation with customers has
indicated a demand forecast for each category over the next 12 months (in thousands of
units) to be as shown in Table 8-11. Manufacturing is primarily an assembly operation,
and capacity is governed by the number of people on the production line. The plant
operates 20 days a month, 8 hours each day. Production of a router takes 20 minutes,
and production of a switch requires 10 minutes of worker time. Each worker is paid $10
per hour, with a 50 percent premium for any overtime. The plant currently has 6,300
employees. Overtime is limited to 20 hours per employee per month. The plant currently
maintains 100,000 routers and 50,000 switches in inventory. The cost of holding a router
in inventory is $3 per month, and the cost of holding a switch in inventory is $1 per month.
The holding cost arises because products are paid for by the customer at existing market
rates when purchased. Thus, if FlexMan produces early and holds in inventory, the
company recovers less given the rapidly dropping component prices.
a. Assuming no backlogs, no subcontracting, no layoffs, and no new hires, what is the
optimum production schedule for FlexMan? What is the annual cost of this schedule?
What inventories does the optimal production schedule build? Does this seem
reasonable?
b. Is there any value for management to negotiate an increase of allowed overtime per
employee per month from 20 hours to 40? What variables are affected by this
change?
c. Reconsider parts (a) and (b) if FlexMan starts with only 5,900 employees. Reconsider
parts (a) and (b) if FlexMan starts with 6,700 employees. What happens to the value
of additional overtime as the workforce size decreases?

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