Nahmias Chapter 3 : Answers for Selected Problems

3.9 a) Cum
Cum Net Net
#Units/ #Units Demand Demand
Worker /Worker Forecast Forecast Min #
Year (in 1000) (in 1000) (in 1000) (in 1000) Workers

1 30 30 280 280 10
2 30 60 120 400 7
3 30 90 200 600 7
4 30 120 110 710 6
5 30 150 135 845 6

Minimum constant work force = 10 workers

b)
Cum Cum
#Units/ Yearly Yearly Net Ending
Year Worker Production Production Demand Inventory

1 30 300 300 280 20
2 30 300 600 400 200
3 30 300 900 600 300
4 30 300 1200 710 490
5 30 300 1500 845 655

1665


3.10 a)

C
H
= 500, C
F
= 1,000, C
I
= .04 per package and payroll costs are $25,000 per year per
worker.

There are exactly 10 - 3 = 7 workers hired in year 1.
Hence the total cost of the constant work force plan is

(500)(7) + (.04)(1665000) + (10)(25,000)(5) = $1,320,100.


Produce 280 in periods 1 and 2 then decrease production to
(845-560)/3 = 95 in period 3.

Cum
Ideal Number Actual Cum Net Ending
Year Production Workers Production Production Demand Inv.

1 280 10 300 300 280 20
2 280 10 300 600 400 200
3 95 3 90 690 600 90
4 95 3 90 780 710 70
5 95 3 90 870 845 25

Totals 29 405


b) This plan requires the hiring of 7 workers in period 1 and firing 7 workers in period 3. The cost
of the plan is:

Hiring and firing = (500)(7) + (100)(7) = $10,500
Payroll = (29)(25,000) = $725,000
Holding = (.04)(405,000) = $16,200
___________________________________________________

Total Cost = $751,70


Number Cum Net Ending
Year Workers #Hired #Fired Production Demand Inv. .

1 10 7 0 300 280 20
2 10 0 0 600 400 200
3 2 0 8 660 600 60
4 2 0 0 720 710 10
5 5 3 0 870 845 25
Totals 29 10 8 315

Hiring and firing cost = (500)(10) + (1000)(8) = $13,000
Payroll cost = (29)(25,000) = $725,000
Holding cost = (.04)(315,000) = $12,600
Total cost = $750,600

Note that this is not the only solution possible. An improved solution drops the number of
workers in period 2 to 5 and in period 5 to 4. The cost of this solution is slightly under
$740,000.



3.11 Again assuming a constant work force size of 10 workers, we obtain

Yearly Yearly Net Ending
Year Production Demand Inventory (Disposal)

1 300 300 0
2 300 120 180
3 300 200 100
4 300 110 190
5 300 135 165

Total = 635

Cost of plan = (7)(500) + (.20)(635,000) + (10)(5)(25,000) = $1,380,500





3.13 k = 1700/120/46 = 0.308 thousands of cookies per worker per day.

Cum Cum *Cum
#Units #Units Forecast Forecast *Monthly Monthly *End
Working /Workers /Workers Demand Demand #Min Product Product Inv.
Month Days (000 (000) (000) (000) Workers (000) (000) (000

1 26 8.01 8.01 850 850 107 1105 1105 255
2 24 7.39 15.40 1260 2110 138 1020 2125 15
3 20 6.16 21.56 510 2620 122 850 2975 355
4 16 4.93 26.49 980 3600 136 680 3655 55

Total 680

*Note: These three columns assume a work force of 138 workers in every period

a) Minimum constant work force = 138 workers

b) C
H
= 100 C
F
= 200 C
I
= 0.1 per cookie per month

Initial # workers = 100 Beg. inv. = 0
# workers hired = 138 - 100 = 38 End inv. = 680

Total cost of this plan is (100)(38) + (.1)(680,000) = $71,800



3.14 k = $60,000/250 = $240 per worker per day

(A) (B)
Cum Predict Cum [B/A] *Cum
#Units #Units Net Net Min # *Monthly Monthly *End
Working /Worker /Worker Demand Demand Workers Product Product Invent.
Mo Days ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)

1 22 5.28 5.28 3280 3280 622 4102.56 4102.56 822.56
2 16 3.84 9.12 3800 7080 777 2983.68 7086.24 6.24
3 21 5.04 14.16 2200 9280 656 3916.08 11002.32 1722.32
4 19 4.56 18.72 1000 10280 550 3543.12 14545.44 4265.44
5 23 5.52 24.24 4900 15180 627 4289.04 18834.48 3654.48
6 20 4.80 29.04 6250 21430 738 3729.60 22564.08 1134.08
7 24 5.76 34.80 3750 25180 724 4475.52 27039.60 1859.60
8 12 2.88 37.68 3100 28280 751 2237.76 29277.36 997.36
9 19 4.56 42.24 1750 30030 711 3543.12 32820.48 2790.48
10 22 5.28 47.52 1450 31480 663 4102.56 36923.04 5443.04
11 20 4.80 52.32 1200 32680 625 3729.60 40652.64 7972.64
12 16 3.84 56.16 1750 34430 614 2983.68 43636.32 9206.32

Total $39,874.56

*Note: These figures assume the minimum constant workforce of 777 workers each month.

a) Minimum constant work force = 777 workers

b) C
H
= 200 C
F
= 400

Initial # workers = 675 Beg. inv = 120000
Workers added = 102 End inv = 100000

Total ending inventory = 39,874,560 + 100,000
= $39,974,560

Inventory costs per month = .25/12 = . 020833/$/month.

Hence total hiring + inventory costs for the constant work force plan are

(200)(102) + (.020833)(39,974,560) = $853,190
3.15
Predict Cum
#Units Net Monthly Cum Net End
/Worker Demand Min # Workers Workers Product Monthly Demand Invent.
Mo. (000) (000) Workers Hired Fired (000) Product (000) (000)

1 5.28 3280 622 0 53 3284.16 3284.16 3280 4.16
2 3.84 3800 990 368 0 3801.60 7085.76 7080 5.76
3 5.04 2200 437 0 553 2202.48 9288.24 9280 8.24
4 4.56 1000 220 0 217 1000.32 10291.44 10280 11.44
5 5.52 4900 888 668 0 4901.76 15193.20 15180 13.20
6 4.80 6250 1303 415 0 6254.40 21447.60 21430 17.60
7 5.76 3750 652 0 651 3755.52 25203.12 25180 23.12
8 2.88 3100 1077 425 0 3101.76 28304.88 28280 24.88
9 4.56 1750 384 0 693 1751.04 30055.92 30030 25.92
10 5.28 1450 275 0 109 1452.00 31507.92 31480 27.92
11 4.80 1200 251 0 24 1204.80 32712.72 32680 32.72
12 3.84 1750 456 205 0 1751.04 34463.76 34430 33.76

Totals 2081 2300 228.72

C
H
= 200 C
F
= 400


Total Cost of hiring, firing, and inventory = (2081)(200) + (2300)(400) +
(.020833)(328,720) = $1,343,048.20.



3.20 a)
Min 200 H
t
+ 400 F
t
+
*
208.33 ( ) I
t
t =1
12

t =1
12

t =1
12

(

(


Subject to
(A) W
1
- W
0
- H
1
+ F
1
= 0

W
2
- W
1
- H
2
+ F
2
= 0
-
-
-
W
12
- W
11
- H
12
+ F
12
= 0

(B) *P
1
= .5280W
1
(C) P
1
- I
1
+ I
0
= 340*
P
2
= .3840W
2
P
2
- I
2
+ I
1
= 380
P
3
= .5040W
3
P
3
- I
3
+ I
2
= 220
P
4
= .4560W
4
P
4
- I
4
+ I
3
= 100
P
5
= .5520W
5
P
5
- I
5
+ I
4
= 490
P
6
= 4800W
6
P
6
- I
6
+ I
5
= 625
P
7
= .5760W
7
P
7
- I
7
+ I
6
= 375
P
8
= .2880W
8
P
8
- I
8
+ I
7
= 310
P
9
= .4560W
9
P
9
- I
9
+ I
8
= 175
P
10
= .5280W
10
P
10
- I
10
+ I
9
= 145
P
11
= .4800W
11
P
11
- I
11
+ I
10
= 120
P
12
= .3840W
12
P
12
- I
12
+ I
11
= 165

(D) I
0
= 12 (E) H
t
, F
t
, I
t
, W
t
, P
t
, > 0
W
0
= 675 for 1 s t s 12



3.22 a)

Att. Att. Total
Month Belts(#) Belts(hrs) Hand(#) Hand(hrs) Case# Case(hrs) Hrs.

1 2500 5000 1250 3750 240 1440 10190
2 2800 5600 680 2040 380 2280 9920
3 2000 4000 1625 4875 110 660 9535
4 3400 6800 745 2235 75 450 9485
5 3000 6000 835 2505 126 756 9261
6 1600 3200 375 1125 45 270 4595

b)
Cum Cum Min.
Working Working Working Demand Workforce
Month Days Hours Hours Hours (Ratio)

1 22 154 154 10190 67
2 20 140 294 20110 69
3 19 133 427 29645 70
4 24 168 595 39130 66
5 21 147 742 48391 66
6 17 119 861 52986 62

Hence the minimum constant work force size is 70. It is probably not advantageous to bring
the work force level up to 70 workers. The excess demand can be absorbed by overtime or
by employing part-time workers. The firm can be more flexible by keeping the number of
full-time employees to a minimum.

c) If a plan is to utilize only regular time employees, then excess demand must be absorbed by
overtime. Since there are 46 employees with the firm, we obtain

(A) (B) (C=46*B) (D) (E=D-C)
Working Regular Required Overtime
Month Hours Hours Hours Hours

1 154 7084 10,190 3106
2 140 6440 9,920 3408
3 133 6118 9,535 3417
4 168 7728 9,485 1757
5 147 6762 9,261 2499
6 119 5474 4,595

Totals: 39,606 14,259

Cost of plan = (39,606)(8.50) + (14,259)(14.00)
= 336,651 + 199,626
= $536,277

d) Here we will determine the size of the work force necessary to meet monthly demands as
closely as possible and add additional employees to meet the excess demand.

(A) (B) (C) (D=[B/C]) (E) (F=D-E) (G=F*C)
Demand Working Regular Add'l Total Hrs.
Month Hours Hour Ratio Workers Workers Add. Emply.

1 10,190 154 67 46 21 3234
2 9,920 140 71 46 25 3500
3 9,535 133 72 46 26 3458
4 9,485 168 57 46 11 1848
5 9,261 147 63 46 17 2499
6 4,595 119 39 46 0 _______

Total: 14,539

From part (c), regular employees cost $336,651.
Additional employees cost (11)(14,539) = $159,929.

Total cost = $336,651 + $159,929 = $496,580



3.23 a) The only decision variables here are the number of hours of overtime versus the number of
additional employees to be hired. The objective is to minimize the total additional payroll
cost.

Let O
t
= # overtime hours in period t.
N
t
= # additional employees hired in period t.

Min 14.00
0
t
t =1
6

+ 11.00 154N
1
+ 140N
2
+ 133N
3
+ 168N
4
+ 1147N
5
+ 119N
6
( )


Subject to:
O
1
+ 154N
1
> 10,190 - 7084 = 3106
O
2
+ 140N
2
> 9920 - 6440 = 3408
O
3
+ 133N
3
> 9535 - 6118 = 3417
O
4
+ 168N
4
> 9485 - 7728 = 1757
O
5
+ 147N
5
> 9261 - 6762 = 2499
O
6
+ 119N
6
> 4595 - 5474 < 0

N
1
, N
2
,...,N
6
s 30

3.29 a) An obvious choice here is the total number of students graduating each year. However,
some academic programs are clearly more popular than others and some academic
departments might require a minimum "critical mass" of faculty even if there are few
student majors.
b) In this case production could be measured by the total number of bookings made by the
agency. If the company earns its commission on percentage basis, then the total dollar
volume of bookings could be a better measure.
c) Here an aggregate unit of production would be a can of fish. The firm would probably
define an average can of fish by forming the weighted average of the labor hours and costs
to produce each fish type where the weights would correspond to the proportion of total
demand represented by each type. The procedure would be similar to that of Example 3.1.


3.32 a)
Cum
Unit/Worker Net Net Min.
Quarter (000) Demand Dem. Work Force

1 1 300 300 300
2 1 630 930 465
3 1 220 1150 384
4 1 180 1330 333

Hence the min. constant workforce is 465 workers.
The cost of the resulting plan is:

Cum Cum Ending
Production Net Demand Inventory
Quarter (000) (000) (000)

1 465 300 165
2 930 930 0
3 1395 1150 245
4 1860 1330 530

Total 940

We must also add back in the 20,000 required to be on hand in the fourth quarter. Hence the
total cost of this plan is:

(1,200)(465 - 280) + (1000)(940 + 20) = $1,182,000.

This is (1)(1000) since production and demand are expressed in (000) of cans.

b)
Units/ Predicted
Worker Net Ending
Quarter (000) Demand Workers Hires Fires Inv.

1 1 300 300 20 0 0
2 1 630 630 330 0 0
3 1 220 220 0 410 0
4 1 180 180 0 40 0

Totals 350 450

Total cost = (1,200)(350) + (2500)(450) + 20,000 = 1,565,000


c) If we use the minimum number of workers required through period 3 of 1150/3 = 384, it
will satisfy the conditions stated.



Quarter Cum Prod Cum Net Dem. Ending Inv.
d)
1 384 300 84
2 768 930 -162
3 1152 1150 2
4 1536 1330 206

Total cost = (1,200)(384 - 280) + (1,000)(312) + (2,000)(162) = $760,800.

Better than policies in parts (a) or (b).




3.38 a)
Min 125 H
t
+ 300 F
t
+ .75 I
t | |
t =1
6

Sub to:
(A) W
1
- H
1
+ F
1
= W
0
= 86
W
2
- W
1
+ H
2
+ F
2
= 0
-
-
-
W
6
- W
5
+ H
6
+ F
6
= 0

(B) P
1
- 50.77 W
1
= 0
P
2
- 101.54 W
2
= 0
P
3
- 92.31 W
3
= 0
P
4
- 106.15 W
4
= 0
P
5
- 73.85 W
5
= 0
P
6
- 92.31 W
6
= 0

(C) I
1
- P
1
= I
0
- D
1
= -4000
I
2
- I
1
- P
2
= -9300
I
3
- I
2
- P
3
= -12200
I
4
- I
3
- P
4
= -17600
I
5
- I
4
- P
5
= -14000
I
6
- I
5
- P
6
= -6300

(D) I
t
> 1000 1 s t s 5
I
6
> 3000

(E) H
t
, F
t
, I
t
, W
t
, P
t
> 0 1 s t s 6.