A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 500 units per month can be used. Backorders are allowed, and they are charged at the rate of $20 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $10 per unit and beginning inventory is zero. Overtime costs $16 per unit and subcontracting costs $20 per unit. In the 4th month, overtime is not possible. While outsourcing is not possible in the 3rd month. Overtime capacity is 50 units and subcontracting capacity is 50 units. Month Forecast 1 400 2 480 3 560 4 720 5 640 6 500 a. Prepare an aggregate plan based on leveling. b. Prepare an aggregate plan if the management decided to switch to chase strategy. In that case the company will increase the overtime capacity by another 100 case at $22 each for the added capacity, and the subcontracting capacity by another 50 case at $23 each for the added capacity.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 500 units per month can be used. Backorders are allowed, and they are charged at the rate of $20 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $10 per unit and beginning inventory is zero. Overtime costs $16 per unit and subcontracting costs $20 per unit. In the 4th month, overtime is not possible. While outsourcing is not possible in the 3rd month. Overtime capacity is 50 units and subcontracting capacity is 50 units.

Month Forecast

1 400

2 480

3 560

4 720

5 640

6 500

a. Prepare an aggregate plan based on leveling.
b. Prepare an aggregate plan if the management decided to switch to chase strategy. In that case the company will increase the overtime capacity by another 100 case at $22 each for the added capacity, and the subcontracting capacity by another 50 case at $23 each for the added capacity.

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