The Manufacturing Corporation (TMC) is to engage you to put together a production plan for the 3 coming 3 quarter for its highly seasonal product.

Forecasted demand: July 420 units, August 570 units and September 510 units.

TMC has existing 30 regular and full-time manufacturing employees. Based on the production efficiency, budget and standard, each employee can produce 15 units per month and labor and material costs at $24 and $120 per unit, respectively.

Any inventory balance at the end of each month is charged with inventory carrying cost at $15 per unit per month while any unserved demand or backlog is charged at $30 per unit per month, Assume no beginning inventory for July. Unserved demand or backlog has to be carried over in the next month.

Additional information:

1. The labor force is unionized and any overtime work is charged at $36 per unit. Third party

labor and sub-contractor are available at $20 per unit but with potential challenge from the

union, quality of work need to be checked.

2. The materials have three components: M1, M2 and M3. a) M1 accounts 60% of total material cost is sourced from a lone supplier Other

suppliers are willing to offer competitive price and terms provided minimum volume is agreed and set. b) M2 accounts for $30 per unit (of finished product) and sourced from importers and

do the trading locally. A potential savings of 10% if sourced directly from foreign source.

c) M3 accounts for $18 per unit or 15% of total material cost. The same material can be

made in-house with $20,000 fixed cost per year and $10 variable cost per unit.

Annual volume is projected around 5,000 units minimum.

Required:

1. Based on the forecast, standards and assumptions, prepare the production plan for the 3 quarter to present the monthly production, inventory balances, labor cost, material cost and inventory related costs.

2. Based on the additional information (#1, #2a, #2b and #2c) present your recommendations supported with applicable computation, analysis and explanation.