Your company is planning the next 5 months of production and you are to develop

Question

Your company is planning the next 5 months of production and you are to develop the high level (aggregate) plan.

The costs are given in the table below.

The marketing department has a policy to allow up to 144 bottles on backorder.

The choses to chase demand but will allow up to 1,500 bottles per period to be made using overtime and up to 500 bottles per period using subcontractors

The number of employees per period is given; each employee can produce 2,000 bottle per period

            Note: If you have employees, you must allow them to produce product

The forecast is given below.

Warehouse B reports that you have a beginning inventory of 8,850 bottles.

Period

1

2

3

4

5

Totals

Forecast (bottles)

14,500

15,200

14,900

15,900

15,555

76,055

Number of employees

7

6

6

6

7

Output

   Regular

   Overtime

   Subcontractor

Output – Forecast

Inventory

   Beginning

   Ending

   Average

Backlog

Costs

   Regular @ $2.90 / bottle

   Overtime @ $3.45 / bottle

   Subcontractor @ $4.04 / bottle

Hire / Lay Off @ $1,250 each

Inventory @ $0.55 / bottle

Backlog @ $1.00 / bottle

Total Costs:

Period

1

2

3

4

5

Totals

Forecast (bottles)

14,500

15,200

14,900

15,900

15,555

76,055

Number of employees

7

6

6

6

7

Output

   Regular

   Overtime

   Subcontractor

Output – Forecast

Inventory

   Beginning

   Ending

   Average

Backlog

Costs

   Regular @ $2.90 / bottle

   Overtime @ $3.45 / bottle

   Subcontractor @ $4.04 / bottle

Hire / Lay Off @ $1,250 each

Inventory @ $0.55 / bottle

Backlog @ $1.00 / bottle

Total Costs:

Explanation / Answer

Solution as per the given constraints is as follows.

Period 1 2 3 4 5 Totals Forecast (bottles) 14,500 15,200 14,900 15,900 15,555 76,055 Number of employees 7 6 6 6 7 Output    Regular @2000/employee 14000 12000 12000 12000 14000 64000    Overtime @1500/period 150 1500 1500 3150    Subcontractor 55 55 Output – Forecast 14000 12000 12150 13500 15555 67205 Inventory    Beginning 8850 8,350 5,150 2,400 0    Ending 8,350 5,150 2,400 0 0    Average 8600 6750 3775 1200 0 Backlog 0 0 0 0 0 Costs    Regular @ $2.90 / bottle 40600 34800 34800 34800 40600 185600    Overtime @ $3.45 / bottle 0 0 517.5 5175 5175 10867.5    Subcontractor @ $4.04 / bottle 0 0 0 0 222.2 222.2 Hire / Lay Off @ $1,250 each 0 1250 0 0 1250 2500 Inventory @ $0.55 / bottle 4730 3712.5 2076.25 660 0 11178.75 Backlog @ $1.00 / bottle 0 0 0 0 0 0 Total Costs: 45330 39762.5 37393.75 40635 47247.2 210368.5

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