The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April Month 0 December 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 August Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $60 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. Evaluate the following plan. This exercise contains only Plan D. 1,450 1,600 1,600 1,700 Plan D: Keep the current workforce stable at producing 1,600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less. Note: Do not produce in overtime if production or inventory are adequate to cover demand. Demand 1,450 1,600 1,600 1,700 2,200 2,200 1.800 1,300 Production (Units) May June July August 1.600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 2.200 2,200 1,800 1,300 Plan D Production Ending O.T. (Units) Inventory 200 | | ■ | | Stockouts (Units)
The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January February March April Month 0 December 1 January 2 February 3 March 4 April 5 May 6 June 7 July 8 August Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $60 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. Evaluate the following plan. This exercise contains only Plan D. 1,450 1,600 1,600 1,700 Plan D: Keep the current workforce stable at producing 1,600 units per month. In addition to the regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 600 units or less. Note: Do not produce in overtime if production or inventory are adequate to cover demand. Demand 1,450 1,600 1,600 1,700 2,200 2,200 1.800 1,300 Production (Units) May June July August 1.600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 2.200 2,200 1,800 1,300 Plan D Production Ending O.T. (Units) Inventory 200 | | ■ | | Stockouts (Units)
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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Transcribed Image Text:**Aggregate Demand Projection and Production Planning**
The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next 8 months as follows:
- **January:** 1,450
- **February:** 1,600
- **March:** 1,600
- **April:** 1,700
- **May:** 2,200
- **June:** 2,200
- **July:** 1,800
- **August:** 1,300
**New Production Plan Discussion**
Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. The stockout cost of lost sales is $60 per unit. Inventory holding costs are $20 per unit per month. Ignore any idle-time costs. The plan to be evaluated is titled "Plan D."
**Plan D Description**
- **Objective:** Keep the current workforce stable at producing 1,600 units per month.
- **Additional Capacity:** In addition to regular production, another 20% of the normal production units can be produced in overtime at an additional cost of $50 per unit.
- **Constraints:** A warehouse limits the maximum allowable inventory on hand to 600 units or less.
- **Note:** Avoid overtime production if regular production or inventory are adequate to meet demand.
**Plan D Analysis Table**
The table below outlines the production plan for each month, demand, and calculates ending inventory and stockouts:
| **Month** | **Demand** | **Production (Units)** | **O.T. Production (Units)** | **Ending Inventory** | **Stockouts (Units)** |
|---------------|------------|------------------------|-----------------------------|---------------------|-----------------------|
| December | - | - | - | 200 | - |
| January | 1,450 | 1,600 | | | |
| February | 1,600 | 1,600 | | | |
| March | 1,600 | 1,600 | | | |
| April | 1,700 | 1,600 | | | |
| May | 2,200 | 1,600 | | | |
| June | 2,200 | 1,600 |
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