You are the operations manager for an OEM manufacturing plant that produces YBOX

Question

You are the operations manager for an OEM manufacturing plant that produces YBOX game consoles. Based on the sales record from 2014, the marketing manager forecasts the demand for Jan- June of 2015 as the following: JAN. FEB. MAR. APR. MAY JUNE 2,500 3,000 4,000 3,500 3,500 3,000 Relevant information includes: Production Time 1 hour per unit Average labor cost $10 per hour Workweek 5 days, 8 hours per day Days per month 20 work days per month Beginning inventory 500 units Safety stock One-half month Shortage cost $20 per unit per month Carrying cost $5 per unit per month As the operations manager, you prefer to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. You currently have 21 workers.

Questions:

a. Which aggregate plan will you use to produce the forecasted demand for YBOX game consoles?

b. What is the total cost for the chosen plan?

Explanation / Answer

Number of hours per day 8 Days of the month 20 Labor cost $10 Number of Labor 21 Beginning inventory (units) 500 Safety Stock for the month 1000 Cost of Excess per unit $5 Cost of shortage per unit $20 Month 500 Present production capacity with 21 labors Cost of production cumulative demand + safety stock Cumulative capacity + inventory Inventory Excess Inventory Shortage cost of Inventory Excess cost of Inventory Shortage Cost of carring safety stoch per month Jan 2500 3360 $33,600 3500 3860 360 1800 $5,000 Feb 3000 3360 $33,600 6500 7220 720 3600 $5,000 Mar 4000 3360 $33,600 10500 10580 80 400 $5,000 Apr 3500 3360 $33,600 14000 13940 0 -60 1200 $5,000 May 3500 3360 $33,600 17500 17300 0 -200 4000 $5,000 Jun 3000 3360 $33,600 20500 20660 160 800 $5,000 Total $201,600 6600 5200 $30,000 Total Cost of the plan $243,400

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