The company is considering using overtime subject to a maximum of 25 % of regular time hours. What is the average cost per
unit if the work force is maintaned at a level so that overtime can be used to the maximum of 25% of regular hours during
the peak period 5?
The company wants to determine the cost of meeting the demand by using a mixed strategy which involves changes in the
number of employees and the use of overtime work. To keep from adding too many employees during the peak period , the
company willuse overtime equal to up to 25 percent of regular time hours available.
The company has 20 employees at the end of the current year( i.e at the beginning of period 1 of the following year which
is being planned) and wants to end period 6 of the planning year with the same number of employees, i.e 20 employees. It
costs $200 t hire and $600 to lay off an employee. The company begins the planning year with no inventory. If at least 50%
of a new employee’s regular-time capacity could be utilized during the current period as well as the next period, it will
add an employee, otherwise overtime will be used. the company will continue to add employees as required until the maximum
employment level as dictated by the constraint of using overtime subject to a maximum of 25% of regular-time hours during
the peak period i.e period 5.
Once the maximum employment level is reached, overtime will be used and no more employees added.
a)Find the employment level for each bimonthly period.
b) Find the total payroll- related costs for the year.
c)What cost per unit results from these payroll-related costs?