Comparing the cost of level production with chase demand, chase demand is the best strategy for the Good and Rich line of chocolate candies.
For the level production strategy, we first need to calculate average quarterly demand.
Level production over the twelve months. Probably the most common approach to production planning is trial and error using mixed strategies and spreadsheets to evaluate different options quickly. Given the following costs and quarterly sales forecasts, determine whether a level production or chase demand production strategy would more economically meet the demand for chocolate candies: For example, many industries that experience a slowdown during part of the year may simply shut down manufacturing during the low-demand season and schedule everyone's vacation during that time.
Forty percent of its business is accounted for by the 2. Customers are given options for when their order is shipped. Disadvantages include the premium paid for overtime work, a tired and potentially less efficient work force, and the possibility that overtime alone may be insufficient to meet peak demand periods.
The workforce size at its peak is 1, workers, but it normally consists of around workers. Demand in excess of production is met by using inventory from the previous quarter. Firing twenty workers in the first quarter: Largely, this is due to the expected 10 per cent annual growth over the next five years.
Now we will be faced with moving enormous quantities of electronic products across several thousand miles of ocean. Cost values are provided in the problem statement for Example During the winter, when demand for chocolate is high, the company hires farmers from surrounding areas, who are idle that time of year.
When two or more are selected, a company has a mixed strategy. How much of a change in demand is needed to justify outsourcing the process? Cost data, expected demand, and available capacities in units for the next four quarters are given here.At what level of demand (in pounds) per year would these two alternatives be equal?
Considering that Transportation, Carrying, Handling, and Ordering Costs are variable and fixed cost are constant, you would take all the variable costs and divide by Million (pounds). So for Ocean Variable Costs, you would get $ per pound and $ for.
This method is useful to forecast demand for mature products with level demand or seasonal demand without a trend.
Example: Method 3: Last Year to This Year The Last Year to This Year formula copies sales data from the previous year to the next year. Thus, the level of demand at which both alternatives are equal is 3 million pounds. From the above computation, the demand level of 3 million pounds, the two alternative costs were equal.
Therefore, the total costs at trade off point are as follows. The level production strategy, shown in Figure (a), sets production at a fixed rate (usually to meet average demand) and uses inventory to absorb variations in demand.
During periods of low demand, overproduction is stored as inventory, to be depleted in periods of high demand. At 1, pounds per year of demand these two alternatives will equal each other in total costs, with air being forecasted as being the more expensive option above this level.
3. Graphically represent the two alternatives and their tradeoff point.
Essay senco electronics company final. 4 Pages. Essay senco electronics company final. Uploaded by. we believe the sealift option is the best option.
2) At what level of demand (in pound) per year would these two alternatives be equal? x=, At an output level ofpounds both transportation system produce the same total.Download