The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students.The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
Academic's management makes the following assumptions:
• Each employee works 550 standard hours of regular time each quarter.
• On average, it takes 27 hours to produce and package 1 unit (1,000 gallons).
• Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour.
• Inventory holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter.
• Because of extremely hot weather, there is no beginning inventory available to start Quarter 1.
• Management wants a constant work force (no hiring or firing).
• Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees.
a. Determine how many employees would be needed to meet the peak required in Quarter 3.
b. Determine the annual inventory holding cost if Academic decides to use a level production rate of 650 units per quarter.
c. Using a level schedule of 650 units per quarter, what will be the annual employee costs?
d. Using a level schedule of 650 units per quarter, what will be the annual employee costs if only 30 employees are available and overtime is used?
e. If management decides on a chase demand strategy, with production last quarter of 600 units and a rate change cost of $3.00/1000 gallons, determine the total rate change cost.

Question

The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students.The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
  Academic's management makes the following assumptions:
 •	Each employee works 550 standard hours of regular time each quarter.
•	On average, it takes 27 hours to produce and package 1 unit (1,000 gallons).
•	Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour.
•	Inventory holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter.
•	Because of extremely hot weather, there is no beginning inventory available to start Quarter 1.
•	Management wants a constant work force (no hiring or firing).
•	Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees.
a.	Determine how many employees would be needed to meet the peak required in Quarter 3.
b.	Determine the annual inventory holding cost if Academic decides to use a level production rate of 650 units per quarter.
c.	Using a level schedule of 650 units per quarter, what will be the annual employee costs?
d.	Using a level schedule of 650 units per quarter, what will be the annual employee costs if only 30 employees are available and overtime is used?
e.	If management decides on a chase demand strategy, with production last quarter of 600 units and a rate change cost of $3.00/1000 gallons, determine the total rate change cost.

Quizplus · Accepted Answer

The Answer of The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students.The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
  Academic's management makes the following assumptions:
 •	Each employee works 550 standard hours of regular time each quarter.
•	On average, it takes 27 hours to produce and package 1 unit (1,000 gallons).
•	Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour.
•	Inventory holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter.
•	Because of extremely hot weather, there is no beginning inventory available to start Quarter 1.
•	Management wants a constant work force (no hiring or firing).
•	Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees.
a.	Determine how many employees would be needed to meet the peak required in Quarter 3.
b.	Determine the annual inventory holding cost if Academic decides to use a level production rate of 650 units per quarter.
c.	Using a level schedule of 650 units per quarter, what will be the annual employee costs?
d.	Using a level schedule of 650 units per quarter, what will be the annual employee costs if only 30 employees are available and overtime is used?
e.	If management decides on a chase demand strategy, with production last quarter of 600 units and a rate change cost of $3.00/1000 gallons, determine the total rate change cost.

The Academic Company Mixes and Bottles a High-Energy Beverage in Various