Problem 2 Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: QUARTER 1 2 3 4 FORECAST 1800 1100 1600 900 Information: Previous quarter's output 5 1,300 cases Beginning inventory 50 cases Stockout cost 5 $150 per case Inventory holding cost 5 $40 per case at end of quarter Hiring employees 5 $40 per case Terminating employees 5 $80 per case Subcontracting cost 5 $60 per case Unit cost on regular time 5 $30 per case Overtime cost 5 $15 extra per case Capacity on regular time 5 1,800 cases per quarter John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: ? to meet the forecast. ? Plan A: a strategy that hires and fires personnel as necessary Plan B: a level strategy. Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and sub contracting. a) Which strategy is the lowest-cost plan? b) If you are John's boss, the VP for operations, which plan do you implement and why?
Problem 2 Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: QUARTER 1 2 3 4 FORECAST 1800 1100 1600 900 Information: Previous quarter's output 5 1,300 cases Beginning inventory 50 cases Stockout cost 5 $150 per case Inventory holding cost 5 $40 per case at end of quarter Hiring employees 5 $40 per case Terminating employees 5 $80 per case Subcontracting cost 5 $60 per case Unit cost on regular time 5 $30 per case Overtime cost 5 $15 extra per case Capacity on regular time 5 1,800 cases per quarter John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: ? to meet the forecast. ? Plan A: a strategy that hires and fires personnel as necessary Plan B: a level strategy. Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and sub contracting. a) Which strategy is the lowest-cost plan? b) If you are John's boss, the VP for operations, which plan do you implement and why?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Problem 2
Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes.
John Mittenthal, the production planner, has assembled the following cost
data and demand forecast:
QUARTER
2
3
4
FORECAST
1800
1100
1600
900
Information:
Previous quarter's output 5 1,300 cases
Beginning inventory 50 cases
Stockout cost 5 $150 per case
Inventory holding cost 5 $40 per case at end of quarter
Hiring employees 5 $40 per case
Terminating employees 5 $80 per case
Subcontracting cost 5 $60 per case
Unit cost on regular time 5 $30 per case
Overtime cost 5 $15 extra per case
Capacity on regular time 5 1,800 cases per quarter
John's job is to develop an aggregate plan.
The three initial options he wants to evaluate are:
?
to meet the forecast.
?
?
Plan A: a strategy that hires and fires personnel as necessary
Plan B: a level strategy.
Plan C: a level strategy that produces 1,200 cases per quarter and
meets the forecast demand with inventory and sub contracting.
a) Which strategy is the lowest-cost plan?
b) If you are John's boss, the VP for operations, which plan do you
implement and why?
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