1. Operations
an exploration of basic manufacturing operations, forecasting, budgeting and control

2. Your Task
You will be running a factory unit for several months and this will involve:
Forecasting sales demand
Produce a budget for the year
Deciding how much to produce
Deciding how much raw materials to buy
Deciding how many shifts to work
Analyse your progress against budget

3. The Business Situation
You are producing a single product
The factory is currently working one shift
But can work up to three shifts
Provided you give two months notice of changes
Each shift can produce 2000 units in normal time or 2400 including overtime
Each unit of production requires one unit of raw materials

4. Costs All costs in a universal currency – the Account Unit
Labour Costs
Fixed Costs – 10,000 AUs per shift
Variable Costs – 2 AUs per unit
Overtime – 6 AUs per unit (in overtime)
Raw Material Costs
Below 2500 units – 6 AUs per unit
Between 2500 and 6000 units – 5.75 AUs per unit
Above 6000 – 5.5 AUs per unit
Other Costs
Overheads – 5,000 AUs per month
Shift Changes – 10,000 AUs per change
Stock Holding – 3 percent of value each month

5. Demand Forecast You have five years’ sales history
There seems to be a long term trend
Sales are seasonal
Sales feel the trend will continue
Accounts feel that this is too optimistic
It is your responsibility to forecast demand and ensure that you produce enough to meet sales need as inventory shortages will loose sales

6. Your Decisions A team name of up to six letters
Then each month decide:
Target Production for the month
Material Purchases (delivered at month end)
Number of Shifts (for month after next)
When making these decisions you should:
Consider the impact on cost
The long as well as the short term
Consider your budget

7. Objectives Operate the business at lowest average cost
Ensure that you meet sales demand
During the ending review be prepared to explain and justify
Your forecasts
How you scheduled the factory
Your results and the budget