QUARTER FORECAST 1,800 1,100 1,600 2 olo 3 4 1ms 900 COSTS/OTHER DATA Previous quarter's output = 1,300 cases m ode la %3D Beginning inventory = 0 cases Stockout cost = $150 per case Sow Inventory holding cost = $40 per case at end of quarter t Hiring employees = $40 per case Terminating emplloyees = $80 per case Subcontracting cost = $60 per case Unit cost on regular time = $30 per case Overtime cost = $15 extra per case Capacity on regular time = 1,800 cases per quarter

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter7: Nonlinear Optimization Models
Section7.3: Pricing Models
Problem 3P: Pricing Decisions at Madison The Madison Company manufactures and retails a certain product. The...
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Southeast Soda Pop, Inc., has a new fruit drink for
which it has high hopes. John Mitten thai, the production planner,
has assembled the fo llowing cost data and demand forecast:                                                                             John's job is to develop an aggregate plan. The three initial
options he wants to evaluate are:
• Plan A: a strategy that hires and fires personnel as necessary
to meet the forecast.
• Plan B: a level strategy.
• Plan C: a level strategy that produces 1,200 cases per quarter
and meets the fo recast demand with inventory and subcontracting.
a) Which strategy is the lowest-cost plan?
b) If you are John's boss, the VP for operations, which p lan do
you implement and why?
QUARTER
FORECAST
1,800
1,100
1,600
2
olo 3
4
1ms 900
COSTS/OTHER DATA
Previous quarter's output = 1,300 cases m ode la
%3D
Beginning inventory = 0 cases
Stockout cost = $150 per case
Sow
Inventory holding cost = $40 per case at end of quarter t
Hiring employees = $40 per case
Terminating emplloyees = $80 per case
Subcontracting cost = $60 per case
Unit cost on regular time = $30 per case
Overtime cost = $15 extra per case
Capacity on regular time = 1,800 cases per quarter
Transcribed Image Text:QUARTER FORECAST 1,800 1,100 1,600 2 olo 3 4 1ms 900 COSTS/OTHER DATA Previous quarter's output = 1,300 cases m ode la %3D Beginning inventory = 0 cases Stockout cost = $150 per case Sow Inventory holding cost = $40 per case at end of quarter t Hiring employees = $40 per case Terminating emplloyees = $80 per case Subcontracting cost = $60 per case Unit cost on regular time = $30 per case Overtime cost = $15 extra per case Capacity on regular time = 1,800 cases per quarter
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