Question

Dave's Stove-Top Popcorn currently has three full-time employees who are each paid $2,100 per month. An employee can only work a maximum of 125 hours per month because production normally takes place at night. They do receive $2,100 even if they do not work 125 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	425	375	470	420	570	110

a-1. Develop a production plan if Dave relies on part-time employees to meet additional demand?

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?

b-2. What is the total cost if Dave hires one more full-time employee to meet additional demand?

Answer 1

a-1

Month	1	2	3	4	5	6	Totals
Demand (Hours)	425	375	470	420	570	110
Full-time hrs. (capacity = 375)	375	375	375	375	375	110
Balance req. = Part-time hrs.	50	0	95	45	195	0	385

a-2

Total cost

= 3 full-timers * $2,100 each per month * 6 months + 385 part-time hrs. * $50 per hr.

= $37,800 + $19,250

= $57,050

b-1

Month	1	2	3	4	5	6	Totals
Demand (Hours)	425	375	470	420	570	110
Full-time hrs. (capacity = 500)	425	375	470	420	500	110
Balance req. = Part-time hrs.	0	0	0	0	70	0	70

b-2

Total cost

= 4 full-timers * $2,100 each per month * 6 months + 70 part-time hrs. * $50 per hr.

= $50,400 + $3,500

= $53,900