New Brunswick’s Soda Pop, Inc., has a new fruit drink for which it has high hopes. Steve Allen, the production planner, has assembled the following cost data and demand forecast:

Quarter                 Forecast
1 ...............................    1800
2 ...............................    1100
3 ...............................    1600
4 ...............................      900
Costs/Other Data
Previous quarter’s output = 1300 cases
Beginning inventory = 0 cases
Stockout cost = $150 per case
Inventory holding cost = $40 per case at end of quarter
Hiring employees = $40 per case
Terminating employees = $80 per case
Subcontracting cost = $60 per case
Unit cost on regular time = $30 per case
Overtime cost = $15 extra per case
Capacity on regular time = 1800 cases per quarter

Steve’s job is to develop an aggregate plan. The three initial options he wants to evaluate are:

• Plan A: a chase strategy that hires and fires personnel as necessary to meet the forecast.
• Plan B: a level strategy.
• Plan C: a level strategy that produces 1200 cases per quarter and meets the forecasted demand with inventory and subcontracting.

a) Which strategy is the lowest-cost plan?
b) If you are Steve’s boss, the VP for operations, which plan do you implement and why?