Case 3 (a) Number of hours per day = 8 Number of working days per month= 20 Total number of hours per annum for each employee= (20*8*12) = 1,920 hours Total number of hours per annum= (1,920 hours*6,300) = 12,096,000 hours Number of overtime hours per employee for each month = 20 Total number of overtime hours for each employee per annum= (20*12) = 240 hours Total number of overtime hours per annum= (240*6,300) = 1,512,000 Total capacity (hours) = (12,096,000+1,512,000) = 13,608,000 hours Allocation of labour hours between Routers and Switches; 1:2 (i) Table 1: Computation of the Optimum Production Schedule Routers Switches Capacity allocation(labour hours) 4,536,000 9,072,000 Capacity requirements per unit(labour hours) 1/3 1/6 Number of optimum production units 13,608,000 54,432,000 (ii) Table 2: Computation of the Cost for the Optimum Production Schedule Routers Switches Optimal capacity allocation-Normal(labour hours) 4,032,000 8,064,000 Optimal capacity allocation-Overtime(labour hours) 504,000 1,008,000 Labour cost per hour-Normal $10 $10 Labour cost per hour-Overtime $15 $15 Labour costs-Normal $40,320,000 $80,640,000 Labour costs-Overtime $7,560,000 $15,120,000 Total Labour Cost $47,880,000 $95,760,000 Consider the following chart which depicts the optimal capacity allocation under normal labour hours and the optimal capacity allocation under the overtime labour hours for FlexMan Electronics Company. Chart 1: Optimal Capacity Allocation This chart confirms the fact that FlexMan would have to allocate extra production labour capacity for the manufacturing of switches compared to the production labour capacity for the manufacturing of routers. (iii) Table 3: Computation of Inventory Routers Switches Opening inventory 100,000 50,000 Number of optimum production units 13,608,000 54,432,000 Annual demand 21,000,000 15,200,000 Closing inventory 0 39,282,000 (iv) This does not seem reasonable since inventory in routers is zero. The implication is that the company is losing on customer sales and goodwill. The inventory for switches is almost three times the annual demand for switches. (b) No, there is no value for management in negotiating for an increase in the allowed overtime per employee for each month from the current level of 20 hours to 40 hours. This is because, the optimal the optimal number capacity level has been reached. The variables that will be affected by this change include the following; labour costs and the total number of units (Routers and Switches) produced. (c) Table 4: Optimal Production Schedule Month Total Demand Number of Employees Hire Layoffs January 3,400 5,417 883 February 3,000 4,792 625 March 4,100 9,166 4,374 April 4,500 7,291 1,875 May 2,300 3,229 4062 June 2,700 6147 2,918 July 1,900 3,229 2,918 August 2,200 4,271 1042 September 3,900 9,063 4,792 October 4,500 10,937 1,874 November 1,800 2,917 8,020 December 1,900 3,125 208 End Year Recruit 3,175 3,175 Total 6,300 18,383 18,383 Cost $700 $1,000 Total Cost $12,868,100 $18,383,000 (d) If FlexMan could improve its training such that new employees are able to achieve full productivity instead of their current 50% productive potential, the implication is that the total labour cost and cost of production will decline by half. This is because; the number of new employees recruited will decline by 50% from the current level of new recruitments. The Implication of this change on the Hiring and Layoff Policy This policy will reduce the number of new employees being hired. The policy may also reduce the number of employees being laid off. (e) FlexMan should use the third party in the event where the required new capacity is less than the available capacity. For instance, FlexMan should use the services of the third party when there is need to hire additional workers who have 50% productivity. In this case, it will be much more worthwhile for the company to use the third party for production of the excess demand than undertake production internally using new employees. (f) In this case, if new employees are able to achieve full productivity right away, the implication is that it will be much more worthwhile and profitable for FlexMan to hire new employees than use the third party in production. Therefore, in this case, there would be no need for FlexMan to use the third party producer of routers and switchers. This is because, since the new employees will have the same productive potential as the existing employees, the company will not incur any extra labour and production costs, which arise when the new employees have less productivity compared to the standard (Walker, 2015). References Walker, A. (2015). Operations management. New York: Wiley Publishers.