• • • 13.12 Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast

John’s job is to develop an aggregate plan. The three initial options he wants to evaluate are:
◆ Plan A: a strategy that hires and fires personnel as necessary to meet the forecast.
◆ Plan B: a level strategy.
◆ Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and subcontracting.

a) Which strategy is the lowest-cost plan?

b) If you are John’s boss, the VP for operations, which plan do you implement and why?

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QUARTER FORECAST 1 1,800 234 1,100 1,600 900 COSTS/OTHER DATA Previous quarter's output = 1,300 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 = 1,800 cases per quarter