Running head: CHASE AND LEVEL STRATEGY

Chase and Level Strategy

Katie L. Tasker
MGT/635
05/22/2016
Deborah Shearer

CHASE AND LEVEL STRATEGY

Professor Shearer,

Please note that I have tried several times to get my Level Strategy final answer correct.
Perhaps after you review my excel page, you can kindly tell me what I have done wrong in my
calculations. I have worked for over five days on this, and I am still not sure I totally understand
it. Thanks

Katie Tasker

CHASE AND LEVEL STRATEGY

Chase and Level Strategy

This summary will explain the assignment, and also provide a brief description of the
essential components students need to solve this. The chase strategy is spot on, however, the
level strategy is a bit off. In addition, this summary will explain which strategy best suits this
scenario, and what savings this company will experience by using the Level strategy.
Problem
A company produces to a seasonal demand, with the forecast for the next 12 months as
given below.
Month

Demand

January

600

February

700

March

800

April

700

May

600

June

500

July

600

August

700

September

800

October

900

November

700

December
600
The present labor force can produce 500 units per month. Each employee added can
produce an additional 20 units per month and is paid $1000 per month. The cost of materials is
$30 per unit. Overtime can be used at the usual premium of time and a half for labor up to a
maximum of 10 percent per month. Inventory-carrying cost is $50 per unit per year. Changes in
production level cost $100 per unit due to hiring, line changeover costs, and so forth. Assume

CHASE AND LEVEL STRATEGY

200 units of initial inventory. Extra capacity may be obtained by subcontracting at an additional
cost of $15 per unit over and above the company's producing them itself on regular time.
Assignment Facts

Capacity of Present Labor Force

500/unit/per month

Additional Labor

20/unit/per month

Cost of Additional Labor

1000/per month

Cost of Materials

30/unit

Overtime Rate

150%/labor rate

Maximum Overtime per Employee

10%/per month

Inventory Carrying Costs

50/unit/per year

Change in Production Level Costs

100/per unit

Initial Inventory

200/units

Subcontracting

15/unit

All calculations for both the chase and level strategies can be found in the attached excel
file.

CHASE AND LEVEL STRATEGY

Recommendation Strategy
After reviewing both the chase and level strategy production results and totals per 12 months,
it is in the best interest of this company to use the Level Strategy with 32 employees. However,
there is also production capacity of 620 units. Moreover, subcontracting for this firm is highly
recommended. The savings for using the level strategy are tremendous.
Savings

Therefore, the total savings would be $142,200.00.

Conclusion
It seems that calculating the chase strategy is easier than calculating the level strategy.
However, this company should use the level strategy to help them save funding.