SummerFun, Inc., produces a variety of recreation and leisure products. The production manager has developed an aggregate
Question:
SummerFun, Inc., produces a variety of recreation and leisure products. The production manager has developed an aggregate forecast:
Month Mar Apr May Jun Jul Aug Sep Total Forecast 50 44 55 60 50 40 51 350 Use the following information to develop aggregate plans.
Regular production cost $80 per unit Backorder cost $20 per unit Overtime production cost $120 per unit Beginning inventory 0 units Regular capacity 40 units per month Overtime capacity 8 units per month Subcontracting cost $140 per unit Subcontracting capacity 12 units per month Holding cost $10 per unit per month Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan.
Hint: You will need extra output in April and August to accommodate demand in the following months.
a. Use regular production. Supplement using inventory, overtime, and subcontracting as needed.
No backlogs allowed.
b. Use a level strategy. Use a combination of backlogs, subcontracting, and inventory to handle variations in demand. There should not be a backlog in the final period.
LO.1
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