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Dave’s Stove-Top Popcorn currently has three full-time employees who are each paid $1,300 per month. An employee can only work a maximum of 100 hours per month because production normally takes place at night. They do receive $1,300 even if they do not work 100 hours, however. Part-time employees can be hired at a cost of $50 per hour. Dave’s Stove-Top Popcorn has forecasted that demand for the next six months will be as follows: Month 1 2 3 4 5 6 Hours 350 295 420 420 520 110
a-1. Develop a production plan if Dave relies on part-time employees to meet additional demand? (Leave no cells blank – be certain to enter “0” wherever required.)
a-2. What is the total cost if Dave relies on part-time employees to meet additional demand?
b-1. Develop a production plan if Dave hires one more full-time employee to meet additional demand? (Leave no cells blank – be certain to enter “0” wherever required.)
b-2. What is the total cost if Dave hires one more full-time employee to meet additional demand?
Expert Answer
a-1 & a-2. Production plan & Total costs
Given the demand data and the following details,
| Month | 1 | 2 | 3 | 4 | 5 | 6 | Total demand |
| Demand (units) | 350 | 295 | 420 | 420 | 520 | 110 | 2,115 |
In this case, 3 regular employees caters to the majority of the requirements with unmet demand by part time employees who makes the balance requirements.
Demand vs production is tabulated,
| Month | 1 | 2 | 3 | 4 | 5 | 6 | Totals |
| Demand (units) | 350 | 295 | 420 | 420 | 520 | 110 | 2,115 |
| Production/labor | 100 | 100 | 100 | 100 | 100 | 100 | |
| Workforce level | 3 | 3 | 3 | 3 | 3 | 3 | |
| Regular Production (#units) | 300 | 295 | 300 | 300 | 300 | 110 | 1,605 |
| Part time Production (#units) | 50 | 0 | 120 | 120 | 220 | 0 | 510 |
| Total Production (#units) | 350 | 295 | 420 | 420 | 520 | 110 | |
| Regular labor costs | 3,900 | 3,900 | 3,900 | 3,900 | 3,900 | 3,900 | 23,400 |
| Part time labor costs | 2500 | 0 | 6000 | 6000 | 11000 | 0 | 25,500 |
| Total labor costs | 6,400 | 3,900 | 9,900 | 9,900 | 14,900 | 3,900 | 48,900 |
Total cost = regular employees cost + part time employee costs = 3 * 1300 + 50 * 510 = $48,900
b-1 & b-2. Production plan & Total costs
In this case, 4 regular employees caters to the majority of the requirements with unmet demand by part time employees who makes the balance requirements.
Demand vs production is tabulated,
| Month | 1 | 2 | 3 | 4 | 5 | 6 | Totals |
| Demand (units) | 350 | 295 | 420 | 420 | 520 | 110 | 2,115 |
| Production/labor | 100 | 100 | 100 | 100 | 100 | 100 | |
| Workforce level | 4 | 4 | 4 | 4 | 4 | 4 | |
| Regular Production (#units) | 350 | 295 | 400 | 400 | 400 | 110 | 1,955 |
| Part time Production (#units) | 0 | 0 | 20 | 20 | 120 | 0 | 160 |
| Total Production (#units) | 350 | 295 | 420 | 420 | 520 | 110 | |
| Regular labor costs | 5,200 | 5,200 | 5,200 | 5,200 | 5,200 | 5,200 | 31,200 |
| Part time labor costs | 0 | 0 | 1000 | 1000 | 6000 | 0 | 8,000 |
| Total labor costs | 5,200 | 5,200 | 6,200 | 6,200 | 11,200 | 5,200 | 39,200 |
Total cost = regular employees cost + part time employee costs = 4 * 1300 + 50 * 160 = $39,200
