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Chase and Level Strategy

The document discusses production planning strategies for a company with fluctuating monthly demand over a 6 month period. It provides the demand numbers and calculates the labor hours, workers needed, production levels and inventory for both a level strategy and a chase strategy. The conclusion states that the chase strategy is better because it produces more units while keeping the per unit price lower than the level strategy.

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OSCAR ALOR LOPEZ
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68 views9 pages

Chase and Level Strategy

The document discusses production planning strategies for a company with fluctuating monthly demand over a 6 month period. It provides the demand numbers and calculates the labor hours, workers needed, production levels and inventory for both a level strategy and a chase strategy. The conclusion states that the chase strategy is better because it produces more units while keeping the per unit price lower than the level strategy.

Uploaded by

OSCAR ALOR LOPEZ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Objective

We need to understand the different strategies and when to apply each one as the case may be and also understand how to o

Conclusion
I think the better strategy in this case is the chase one because you are producing more units than the level strategy and the p
one who is producing less and his price por unit ir higger that the chase strategy.
e and also understand how to obtain all points explained.

han the level strategy and the price per unit is less than the other
Demand/mo Jan Feb Mar Apr
4500 5500 7000 10000
Material $ 5.00 per unit
Holding Costs $ 1.00 unit per mo.
Marginal cost of stockout $ 1.25 unit per mo.
Hiring and training cost $ 200.00 worker
Layoff costs $ 250.00 worker
Labor hours required 0.15 hrs/unit
Straight time labor cost $ 8.00 per hour
Beginning inventory 250 units
Productive hours/worker/day 7.25
Paid straight hrs/day 8
May Jun
8000 6000
Demand/mo Jan Feb Mar Apr May Jun
4500 5500 7000 10000 8000 6000
Jan Feb Mar Apr May Jun
Days/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Units/worker 1063.33 918.33 1015.00 1015.00 1063.33 966.67
$/worker $ 1,408.00 $ 1,216.00 $ 1,344.00 $ 1,344.00 $ 1,408.00 $ 1,280.00
Jan Feb Mar Apr May Jun
Days/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Units/worker 1063 918 1015 1015 1063 967
$/worker $ 1,408.00 $ 1,216.00 $ 1,344.00 $ 1,344.00 $ 1,408.00 $ 1,280.00

Jan Feb Mar Apr May Jun


Demand 4,500 5,500 7,000 10,000 8,000 6,000
Beg. Inv. 250
Net Req. 4,250 5,500 7,000 10,000 8,000 6,000
Req. Workers 3.997 5.989 6.897 9.852 7.524 6.207
Hired 2 1 3
Fired 3 2 1
Workforce 4 6 7 10 8 7
Ending inventory 0 0 0 0 0 0

Material $21,250.00 $27,500.00 $35,000.00 $ 50,000.00 $40,000.00 $30,000.00


Labor 5627.59 7282.76 9268.97 13241.38 10593.10 7944.83
Hiring Cost $ - $ 400.00 $ 200.00 $ 600.00 $ - $ -
Firing Cost $ 750.00 $ - $ - $ - $ 500.00 $ 250.00
41,000

Costs
$ 203,750.00
53958.62
$ 1,200.00
$ 1,500.00
Units Sold Price/unit
$ 260,408.62 40,750 $ 6.39
Jan
Demand 4,500
Beg. Inv. 250
Net Req. 4,250
Workers 6
Production 6,380
Ending inventory 2,130
Surplus 2,130
Shortage

Jan Feb Mar Apr May Jun


Demand 4,500 5,500 7,000 10,000 8,000 6,000 41,000
Beg. Inv. 250 2,130 2,140 1,230 -2,680 -4,300
Net Req. 4,250 3,370 4,860 8,770 10,680 10,300
Workers 6 6 6 6 6 6
Production 6,380 5,510 6,090 6,090 6,380 5,800
Ending Inv. 2,130 2,140 1,230 -2,680 -4,300 -4,500
Surplus 2,130 2,140 1,230
Shortage 2,680 4,300 4,500

Jan Feb Mar Apr May Jun


$ 8,448.00 $ 7,296.00 $ 8,064.00 $ 8,064.00 $ 8,448.00 $ 7,680.00 $ 48,000.00
31,900 27,550 30,450 30,450 31,900 29,000 $ 181,250.00
2,130 2,140 1,230 $ 5,500.00
3,350 5,375 5,625 $ 14,350.00

$ 249,100.00
Units sold Price/unit
35,375 $ 7.04

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