HW4 1. Develop a production aggregate plan and calculate the corresponding cost,

Question

HW4 1. Develop a production aggregate plan and calculate the corresponding cost, given the following forecast: Month 1 2 3 4 5 6

Forecast 380 400 420 440 460 480

Use steady regular output of 400 units per month, use overtime as needed for up to 40 units per month, and use subcontracting to make up any needed output to match the forecast. Assume that no backorder is allowed. Hint: compare all possible production plans and select the best with the lowest total cost. Unit costs are: Regular output = $25/unit, Overtime = $40/unit, Subcontract = $60/unit, Inventory cost = $15/unit/average inventory

Explanation / Answer

The minmum production cost are calculated by trial and error method in excel:

Month Demad Production Overtime Subcontracting Closing stock 1 380 400 0 0 20 2 400 400 20 0 40 3 420 400 40 0 60 4 440 400 40 0 60 5 460 400 40 0 40 6 480 400 40 0 0 Total Units 2400 180 0 220 Cost per unit 25 40 60 15 Total Cost 60000 7200 0 3300 Minimum cost 70500

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