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Mr. Alex is the head of operations at TractParts Pvt. Ltd., awell known Indian manufacturer of pumps, engines, electric motorsand transformers. The company is one of India’s earliest industrialgroups established in the 1980 which has grown to be a big playerin the Indian manufacturing industry. TractParts under thesupervision of Mr. Alex has been supplying modern tractor enginesto the leading tractor manufacturing firms like Sonalika and JohnDear. The bulk of demand for tractors comes during the months fromOctober to March. As a result of this seasonality in demand, thedemand for the tractor engines also keeps fluctuating throughoutthe year as shown in Exhibit 1. Exhibit 1 shows the orders placedwith TractParts by the firms Sonalika and John Dear in advancebased on their own forecasting models.

Exhibit 1:

Month	Sonalika	John Dear	Total
April	500	400	900
May	300	200	500
June	100	150	250
July	125	100	225
August	200	150	350
September	300	350	650
October	1500	1450	2950
November	3000	3200	6200
December	3200	3500	6700
January	3800	3500	7300
February	2200	2150	4350
March	2200	2400	4600

To meet the demands, the company can follow chase strategy orlevel strategy In the chase strategy, the monthly production takesplace as per the total demand in that month and to follow thisstrategy, the company can hire new employees during higher demandand fire the employees during lower demand. This strategy basicallysaves on the inventory carrying cost and hence the total cost. Inthe level strategy, the company produces the average demand in amonth and the excess units are stored as inventory and all stockouts are backlogged and supplied from the following month’sproduction. This strategy particularly saves on the employee hiringand firing cost. Moreover, the backorder quantity is also directlyproportion to the demand placed by the tractor manufacturing firmsin order to give equal treatments to them.

At the beginning of the period, there are 100 workers in theTractParts manufacturing facility and a total of 200 working hours(8 hours/day * 25 days/month) are available per worker per month.Due to the strict government policies, the company canny allowovertime.

Mr. Alex is concerned about the fluctuating demand andunderstands that these companies can change their demand patternbased on the promotion and discount offered to them. In order toenhance the total profit, Mr. Alex wanted to optimize costs whilemeeting the demand pattern. He had therefore asked to one of hisassociates to find out the associated costs and the cost structure.The associate presented cost structure for the engine manufacturingline as is shown in Exhibit 2.

Exhibit 2:

Component	Cost	Unit
Material Cost	140	$/unit
Inventory Cost	15	$/unit/month
Stock-Out Cost	20	$/unit/month
Hiring Cost	450	$/worker
Firing Cost	750	$/worker
Labor Hours Required	4	per unit
Regular Labor Rate	4	$/hour
Beginning Inventory	750	units
Desired Closing Inventory	400	units
Selling Price	280	$/unit

Mr. Alex had asked the associate to find out the possibility ofdiscount that could be offered to the tractor manufacturers. MrAlex was informed that at max 10% discount could be given to themand as per company policy, discount would be offered for only onemonth. The associate also pointed out that whenever such kinds ofdiscounts are offered, the tractor manufacturers have a tendency toorder more in that month. However, the order size for followingmonths is significantly reduced compared to the previous month.

After going through some previous data, Mr. Alex has made someobservations. For Sonalika, 10% decrease in price for a particularmonth results in 45 % increase in the demand for the same monthfollowed by 15% decrease in demand for the next two months. And inthe case of John Dear, 10% decrease in price for a particular monthresults in 80% increase in the demand for the same month followedby 25% decrease in demand for the next two months. However, Mr.Alex also observed that if the TractPart offers a discount in thelast 2 months of the financial year, there is no change in thedemand pattern since there is a very fixed demand of tractors inthe end of season.

Mr. Alex faced a unique problem as the TractParts had provenitself over the years and was considered a symbol of quality,reliability and accountability. Being a part of this value system,Mr. Alex knew that any unfair treatment with the tractormanufacturers would not be tolerated. Mr. Alex has a meeting withthe company’s Sr. VP the next morning. He is concerned about theproduction policy to be adapted and discount to be given offered toincrease the total profit. Please help Mr. Alex to take thedecision focusing on the following questions.

Questions:

1. Estimate the profit made by TractParts when it follows thelevel strategy and no discount is offered to the tractormanufacturing firms.

2. Estimate the profit made by TractParts when it follows thechase strategy and no discount is offered to the tractormanufacturing firms

3. Estimate the profit made by TractParts when it follows thelevel strategy and a 10% discount is offered to the tractormanufacturing firms in October.

4. Find out the month having the peak demand in which 10%discount can be offered to the tractor manufacturing firms, whenTractParts follows the level strategy. (Hint: Estimate the profitmade by TractParts when it follows the level strategy and a 10%discount has been offered to the tractor manufacturing firms invarious months.)

5. Estimate the profit made by TractParts when it follows thechase strategy and a 10% discount is offered to the tractormanufacturing firms in October.

6. Find out the month having the peak demand in which 10%discount can be offered to the tractor manufacturing firms, whenTractParts follows the chase strategy. (Hint: Estimate the profitmade by TractParts when it follows the chase strategy and a 10%discount has been offered to the tractor manufacturing firms invarious months.)

I REALLY NEED HELP WITH 4 AND 6. PLEASE INCLUDE EXCEL SHEET.THANK YOU IN ADVANCE.