Your company is planning the next 6 months of production and you are to develop
ID: 447061 • Letter: Y
Question
Your company is planning the next 6 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 never allow backorders. The company's level strategy keeps your workforce fully utilized while first allowing overtime production (up to 100 crates) and then using your subcontractor for any additional production as needed. Management has approved the hiring of an additional worked beginning in week 3. The forecast is given below. Your warehouse reports that you only have 10 crates to begin with.Explanation / Answer
Period 1 2 3 4 5 Total Forecast (A) 600 500 550 600 480 2730 Capacity on Regular Shift (B) 450 450 480 480 480 2340 Output Regular 450 450 480 480 480 2340 Overtime (A-B, upto 100) 100 50 70 100 0 320 Subcontract (If A-B >100, then A-B-100) 40 0 0 20 0 60 Output- Forecast ( C) 590 500 550 600 480 2720 Inventory Beginning (Last period ending) 10 0 0 0 0 10 Ending (Output + Beginning - Forecast) 0 0 0 0 0 0 Average (Beginning + Ending / 2) 5 0 0 0 0 5 Backlog (Beginning+Output - Forecast, if negative) 0 0 0 0 0 0 Costs: Regular (Regular Output @ $310/crate) $139,500 $139,500 $148,800 $148,800 $148,800 $725,400 Overtime (Overtime Output @ $450/crate) $45,000 $22,500 $31,500 $45,000 $0 $144,000 Subcontract (Subcontract Output @ $460/crate) $18,400 $0 $0 $9,200 $0 $27,600 Hire / Lay Off @ $15 each $0 $0 $15 $0 $0 $15 Inventory (Average Inventory @ $100/crate) $500 $0 $0 $0 $0 $500 Backlog @ $18/crate $0 $0 $0 $0 $0 $0 Total Costs $203,400 $162,000 $180,315 $203,000 $148,800 $897,515 Subcontract - For period 1 is 600 - 450 - 100 - 10 = 40 units Forecast - Regular Capacity - Overtime - Beginning Inventory
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