FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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2

Deforrest Marine Motors manufactures engines for the speedboat racing circuit. As part of their annual planning cycle, they forecasted demand for the next four quarters. The
number of available days of production and the anticipated demand are glven below.
Q1
Q2
Q3
Q4
Demand
2.400
2,200
1,700
1,800
They also estimated many of the costs required to conduct operations planning Some of these key figures are listed below,
Employees
Production Rate
Production Cost
Backorder Cryt
Overtime Cost
Overtime Limit
Hire Cost
Fire Cost
Subcontracting Cost
Subcontracting Limit
Inventory Cost
Initial Inventory
$1.200/employee
$800/employee
$1,800/unit
400 units maximum
$100/unit/quarter
280 units
30
70 units/employee/quarter
$1,000/unit
$200
$1,500
= 25% of Reg. Production
Deforrest Marine Motors wishes to maintain the current number of employees for the entire year to followa level strategy balanced with inventory and backorders as needed.
What is the total cost of this plan?
6,019.200
Question 4
If management at Deforrest Marine Motors is interested in a chase strategy using a hire/fire option, what is the total cost of this plan? They plan on using a policy where if the need
were for 21.2 workers, they would hire 22 workers for that quarter. (Hint: this will impact regular time production and inventory.)
Question 5
If management at Detorrest Marine Motors is interested in a level strategy with their current employees using overtime and subcontracting when demand cannot be balanced with
inventory, what is the total cost of this plan?
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Transcribed Image Text:Deforrest Marine Motors manufactures engines for the speedboat racing circuit. As part of their annual planning cycle, they forecasted demand for the next four quarters. The number of available days of production and the anticipated demand are glven below. Q1 Q2 Q3 Q4 Demand 2.400 2,200 1,700 1,800 They also estimated many of the costs required to conduct operations planning Some of these key figures are listed below, Employees Production Rate Production Cost Backorder Cryt Overtime Cost Overtime Limit Hire Cost Fire Cost Subcontracting Cost Subcontracting Limit Inventory Cost Initial Inventory $1.200/employee $800/employee $1,800/unit 400 units maximum $100/unit/quarter 280 units 30 70 units/employee/quarter $1,000/unit $200 $1,500 = 25% of Reg. Production Deforrest Marine Motors wishes to maintain the current number of employees for the entire year to followa level strategy balanced with inventory and backorders as needed. What is the total cost of this plan? 6,019.200 Question 4 If management at Deforrest Marine Motors is interested in a chase strategy using a hire/fire option, what is the total cost of this plan? They plan on using a policy where if the need were for 21.2 workers, they would hire 22 workers for that quarter. (Hint: this will impact regular time production and inventory.) Question 5 If management at Detorrest Marine Motors is interested in a level strategy with their current employees using overtime and subcontracting when demand cannot be balanced with inventory, what is the total cost of this plan?
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