Questions
1. Calculate
a. The production of loaves per month in February 2016, and February 2017. Explain how you used the factory’s capacity and utilisation to calculate these values. (2 marks)
b. Calculate the efficiency of the factory in February 2016, and February 2017, and explain why the increase in production over this period may have contributed to the problems the factory is now experiencing
(3 marks)
2. Explain why using a simple moving average as the basis for forecasting production need is likely to be inaccurate during the current business growth. Include in your explanation why a weighted moving average calculation may be more accurate. Your answer should include suggested weightings for each of the previous three months for the calculation, and a representative calculation to show how using WMA forecasting will reduce the forecasting error calculated using the Mean Absolute Deviation. (10 marks)
3. Complete the table below and explain the changes in operating profit as a percentage of revenue, and the inventory turnover as a result of probable increased costs and inefficiencies in the supply chain management, production planning, and inventory management and distribution, due to the business’s rapid growth. (9 marks)
|
| Feb-16 | Feb-17 |
|
| | |
| Production (loaves) |
|
|
| Revenue/Unit | $1.50 | $1.50 |
| Cost of goods sold per unit | $0.80 | $0.80 |
| Cost of goods sold total (month) |
|
|
| Operating costs, admin, sales rates, electricity etc / month | $100,000.00 | $150,000.00 |
| Total Revenue / month |
|
|
| Operating profit ($) / month |
|
|
| Operating profit (% of revenue) / month |
|
|
| materials | Inventory | $30,000.00 | $60,000.00 |
| WIP | $10,000.00 | $16,625.00 |
| Finished goods | $5,000.00 | $8,000.00 |
| Total Inventory | $45,000.00 | $84,625.00 |
| monthly Inventory turnover (times / month) | | |
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4. Explain how this business would benefit from using a master production schedule and by linking this to materials requirements planning. (8 marks)
5. Explain how an integrated approach to supply chain and inventory management will benefit this organisation. You should include in your answer the possibility of implementing JIT and Kanban systems. (23 marks)
6. If the current growth continues suggest and justify a capacity management strategy that will enable the business to satisfy demand whilst minimising risk.
(5 marks)