# What isthe av era%e cost per unit if the work force is maintained at a level so that overtime can be used the maximum of2 °/o of regular hours during the peak period in period 5?

age 129 Question 2 and 3.

Question 2
The company is considering using overtime subject to a maximum of 25 percent of regular-time
ours.
What isthe av era%e cost per unit if the work force is maintained at a level so that overtime can be used
the maximum of2 °/o of
regular hours during the peak period in period 5?
Question 3
The company wants to determine the cost of meeting the demand by using a
mixed strategy which inv olv es
changes in the number of employees and the use of ov ertime work. To keep from adding too many
tem orar
empployeeys during the peak demand period, the company will use overtime equal to up to 25
pfircent of the regular-time hours av ailable.

company has 22 emplo ees 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. 22 employees. It costs \$400 to hire and \$500 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 percent 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 are added.
a) Find the employment level for each bimonthly period.
b) Find the total
pay’r/oll-related costs for the year.
c) hat cost per unit results from these payroll-related costs? (Ans. \$126 per unit)

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