1. 1 Use the data provided below, develop a hybrid plan using a permanent workforce of 195 employees supplemented by subcontracting. If demand exceeds regular-time production plus subcontracting plus inventory, the company will use backorders. Calculate the cost of this plan.

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3. 3 We calculate the regular-time production rate using a permanent workforce of 195 employees. Regular-time available per period = 160 hours Number of employees = 195 Production standard per unit = 6 hours Therefore, regular-time production per period = (195 x 160) / 6 = 5200 units

4. 4 We show the plan computation period by period.

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10. 10 We compute the plan’s costs. Regular time labor cost = regular labor cost per hour x total units of regular time production x labor standard per unit = $10 x (5200 x 6) x 6 = $ 1872000

11. 11 We compute the plan’s costs. Subcontracting cost = Total units of subcontracting x subcontracting cost per unit = (500 + 1000 + 1000 + 1000) x $84 = $ 294000

12. 12 We compute the plan’s costs. Inventory holding cost = Total units of ending inventory x holding cost per unit per period = (100 + 500 +1100) x $10 = $ 17000

13. 13 We compute the plan’s costs. Backorder cost = Total units of backorder x Backorder cost per unit per period = (1140 + 140 + 500) x $20 = $ 35600

14. 14 We compute the plan’s costs. Firing cost = (Beginning workforce – Current workforce) x Firing cost per employee = (210 - 195) x $450 = $ 6750

15. 15 We compute the plan’s costs. Total plan cost = Regular time labor + Subcontracting + Holding + Backorder + Firing = 1872000 + 294000 + 17000 + 35600 + 6750 = $ 2225350