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1. Skycell, a major European cell phone manufacturer, is makingproductionplans for the coming year. Skycell has worked with its customers (the service providers) to come up with forecasts of monthly requirements (in thousands of phones) as shown inTable8-10.
2. Table8-10Monthly Demand for Cell Phones, in Thousands
3. Month
4. Demand
5. January
6. 1,000
7. February
8. 1,100
9. March
10. 1,000
11. April
12. 1,200
13. May
14. 1,500
15. June
16. 1,600
17. July
18. 1,600
19. August
20. 900
21. September
22. 1,100
23. October
24. 800
25. November
26. 1,400
27. December
28. 1,700
29. Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on theproductionline. The plant operates for 20 days a month, eight hours each day. One person can assemble a phone every 10 minutes. Workers are paid 20 euros per hour and a 50 percent premium for overtime. The plant currently employs 1,250 workers. Component costs for each cell phone total 20 euros. Given the rapid decline in component and finished-product prices, carrying inventory from one month to the next incurs a cost of 3 euros per phone per month. Skycell currently has a no-layoff policy in place. Overtime is limited to a maximum of 20 hours per month per employee. Assume that Skycell has a starting inventory of 50,000 units and wants to end the year with the same level of inventory.
30. Assuming no backlogs, no subcontracting, and no new hires, what is the optimumproductionschedule? What is the annual cost of this schedule?
31. Is there any value for management to negotiate an increase of allowed overtime per employee per month from 20 hours to 40?
32. Reconsider parts (a) and (b) if Skycell starts with only 1,200 employees. Reconsider parts (a) and (b) if Skycell starts with 1,300 employees. What happens to the value of additional overtime as the workforce size decreases?
33. Consider part (a) for the case in which Skycell aims for a levelproductionschedule such that the quantity produced each month does not exceed the average demand over the next 12 months (1,241,667) by 50,000 units. Thus, monthlyproduction, including overtime, should be no more than 1,291,667. What would be the cost of this levelproductionschedule? What is the value of overtime flexibility?

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