Question

Poseidon Meter, Inc., makes a variety of water meters. Data for the past year indicate a worker can make, on average, 100 meters per four-week period. The forecast for the next four periods is 1200, 1200, 1000, and 1000 meters, respectively.Beginning inventory 0 unitsInitial workforce size 10 workersProduction and costsWages $1,500/worker/periodInventory $1/meter/period (based on average inventory during each period)Back order $2/meter/period (based on back orders at end of period)Hiring $1,000/workerLayoff $2,000/workerDevelop a constant work force plan for the next four periods. Summarize the plan, its costs, and its consequences.

Answer 1

Poseidon Meters

Production Plan (with constant workforce)

For periods 1, 2, 3 and 4

Periods

1 2 3 4

Beginning inventory 0 0 0 0

Production requirement 1,200 1,200 1,000 1,000

Actual production 1,100 1,100 1,100 1,100

Ending inventory 0 0 0 0

Employees 11 11 11 11

Wages $16,500 $16,500 $16,500 $16,500

Hiring/layoff costs $1,000 $0 $0 $0

Back orders (in units) 100 200 100 0

Back order costs $2,000 $4,000 $2,000 $0

Holding costs $0 $0 $0 $0

Total costs $19,500 $20,500 $18,500 $16,500