Answered Essay: Dave's Stove-Top Popcorn currently has three full-time employees who are each paid $1,300 per month.

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

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