215 ucts. The producion Inc., produces a variety of recreation and leisure has d

Question

215 ucts. The producion Inc., produces a variety of recreation and leisure has developed an aggregate forecast JunJul Aug Sep bal u 50 Mar Apr May - Month 60 40 51 Forecast50 Use the following information to develop aggregate plans Back-order cost Beginning inventory units S80 per unit $120 per unit 40 units per month 8 units per month $140 per unit 12 units per month $10 per unit per month $20 per unit Regular production cost Overtime production cost Regular capacity vertime capacity Subcontracting cost Subcontracting capacity Holding cost Develop an aggregate plan using each of the following guidelines and compute the total cos fr a Use regular production. Supplement using inventory, overtime, and subcontracting as nodd each plan. Which plan has the lowest total cost? No backlogs allowed. se a level strategy. Use a combination of backlogs, subcontracting, and inventory to hani variations in demand. 8. Now Juice, Ine

Explanation / Answer

a.

b.

Total Cost of Regular production plan using overtime and subcontracting has lower cost in comparison of cost of level strategy by using subcontracting and backorders.

Total Cost of Plan (Using Regular production) Month 1 2 3 4 5 6 7 Total Forecast 50 44 55 60 50 40 51 350 Beginning Inventory 0 0 4 0 0 0 3 7 Regular Production 40 40 40 40 40 40 40 280 Overtime Production 8 8 8 8 8 3 8 51 Subcontracting 2 0 3 12 2 0 0 19 Total Production 50 48 51 60 50 43 48 350 Ending Inventory 0 4 0 0 0 3 0 7 Ending Backorders 0 0 0 0 0 0 0 0 Cost: Regular Production cost ($80 per unit) $3,200 $3,200 $3,200 $3,200 $3,200 $3,200 $3,200 $22,400 Overtime Production cost ($120/unit) $960 $960 $960 $960 $960 $360 $960 $6,120 Subcontracting cost ($140/unit) $280 $0 $420 $1,680 $280 $0 $0 $2,660 Inventory holding cost ($10/unit per month) $0 $40 $0 $0 $0 $30 $0 $70 Backorder cost ($20/ unit) $0 $0 $0 $0 $0 $0 $0 $0 Total Cost (Per Month) $4,440 $4,200 $4,580 $5,840 $4,440 $3,590 $4,160 $31,250

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