Jerusalem Medical Ltd., an Israeli producer of portable kidney dialysis units an

Question

Jerusalem Medical Ltd., an Israeli producer of portable kidney dialysis units and other medical products, develops a 4 month aggregate plan. Demand and capacity(in units) are forecast as follows:

The cost of producing each dialysis unit is $985 on regular time. $1310 on overtime, and $1500 on a subcontract. Inventory carrying cost is $100 per unit per month. There is to be no beginning or ending inventory in stock and backorders are not permitted. Set up a production plan that minimizes cost using the transportation method.

Capacity source Month 1 Month 2 Month 3 Month 4 Labor Regular time 235 255 290 300 Overtime 20 24 26 24 Subcontract 12 15 15 17 Demand 255 294 321 301

Explanation / Answer

Month 1: regular time - 235. Overtime: 20 subcontract - 0

Month 2: regular time - 255. Overtime: 24 subcontract - 15

Month 4: regular time - 300. Overtime: 1 subcontract - 0

Month 3: regular time - 290 Overtime: 26 subcontract - 5

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