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Maximum production capacity is 1500 units per period in regular time and the plant is currently producing 800 units per period. Each employee can produce 75 wheelbarrows per period and works 160 hours per month. They are paid $18 per hour plus 20% for benefits. Extra production, to a maximum of 8 hours per week per employee can be added. The overtime premium is 1.5 times the wage rate. A subcontractor has approached Sangster and would be able to do a maximum of 200 units per period and would charge $50 per unit. Sangster’s buyer estimates that the administration costs, shipping, etc. will add $10 more to each wheelbarrow if subcontracted.
New hire costs are estimated at $400 per employee. It takes a period or two for a new employee to learn how to make wheelbarrows. Firing costs are $800 per employee. Most the current employees have worked for Sangster for a long time.
Case Analysis
This case analysis is to be prepared in groups of two-three. Your analysis should follow the case analysis steps that are outlined on eConestoga. Your case analysis must include the following:
1)Determine the workforce and production plan based on:
a)Level strategy
b)Chase strategy
c)Mixed strategy
2)Present a cost comparison between the four plans and recommend the most attractive option based on quantitative (minimizing total costs) and qualitative factors. A discussion of the criteria and assumptions you used when constructing your plan.
3)From a strategic perspective, what would you recommend and why? What are some of the advantages and disadvantages of the solution you recommended?
4)A peer evaluation (form provided), signed by all members of your team. Note: If a group member did not contribute 1/3 of the work on the project then their mark will reflect their contribution.
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