Renova has two manufacturing sites located in Australia. Renova faces difficulty in workforce scheduling as product demand fluctuates considerably from month to month. To address this issue, Renova started hiring temporary workers supplied by BK, a company that specialises in providing temporary employees for firms in Australia. BK offered to provide temporary employees under three contract options that differ in terms of the length of employment and the cost. The three options are summarised: Option Length of Employment Cost $1800 2 One Month Two Months Three Months $4000 $6200 3 Three M The longer contract periods are more expensive because BK experiences greater difficulty finding temporary workers who are willing to commit to longer work assig Over the next six months, Renova projects the following needs for additional employees: April June Month January Employee Expected 115 15 February March 105 May 25 32 10 Each month, Renova can hire as many temporary employees as needed under each of the three options. For instance, if Renova hires five employees in January under Option 2, BK will supply Renova with five temporary workers who will work for two months: January and February. For these workers, Renova will have to pay 5($4000) = $20,000. Because of some merger negotiations under way, Renova does not want to commit to any contractual obligations for temporary employees that extend beyond June. Renova's quality control program requires each temporary employee to receive training at the time of hire. The training program is required even if the person worked for Renova in the past. Renova estimates that the cost of training is $700 each time a temporary employee is hired. Thus, if a temporary employee is hired for one month, Renova will incur a training cost of $700, but will incur no additional training cost if the employee is on a two- or three-month contract. Develop a model that can be used to determine the number of temporary employees Renova should hire each month under each contract plan in order to meet the projected needs at a minimum total cost.
Include the following items in your report:
1. A schedule that shows the number of temporary employees that Renova should hire each month for each contract option.
2. A summary table that shows the number of temporary employees that Renova should hire under each contract option, the associated contract cost for each option, and the associated training cost for each option. Provide summary totals showing the total number of temporary employees hired, total contract costs, and total training costs. (4 marks)
3. Suppose that Renova hired 5 full-time employees at the beginning of January in order to satisfy part of the labour requirements over the next six months. If Renova can hire full-time employees for $25 per hour, including fringe benefits, what effect would it have on total labour and training costs over the six-month period as compared to hiring only temporary employees? Assume that full-time and temporary employees both work approximately 168 hours per month. Provide a recommendation regarding the decision to hire additional full-time employees. (4 marks)
4. If the cost to train each temporary employee could be reduced to $500 per month, what effect would this change have on the hiring plan of part 1?Explain.
Discuss the implications that this effect on the hiring plan has for identifying methods for reducing training costs. How much of a reduction in training costs would be required to change the hiring plan? (4 marks)
