Question
Aggregate Planning A key hospital supplier, IVs Plus (IVP) located in Salina, KS sells IV tubing and stands to hospitals and clinics. Sales have picked
Aggregate Planning
A key hospital supplier, IVs Plus (IVP) located in Salina, KS sells IV tubing and stands to hospitals and clinics. Sales have picked up ever since they introduced their newest Squeaky Clean IV stand, which eliminates all oils and germs left behind by users. Though IVP sells these stands all year long, they sell the most during the summer months, when end-of-fiscal year purchases are at a peak. The demand over the next 12 months is shown in the table below. Use the demand forecasts and determine the lowest cost production plan.
Month | Demand Forecast | Month | Demand Forecast |
January | 133,067 | July | 251,630 |
February | 155,026 | August | 249,630 |
March | 168,200 | September | 200,312 |
April | 173,890 | October | 160,830 |
May | 202,759 | November | 145,266 |
June | 260,842 | December | 128,900 |
Regular production cost (labor and material cost) | $48 per unit |
Holding cost | $13 per unit per month based on ending inventory |
Backorder cost | $17.00 per unit per month based on ending inventory |
Beginning Inventory | 430,000 units |
Beginning workforce | 18 employees |
Regular production rate | 9,600 units per employee per month |
Hiring cost | $14,000 per worker |
Firing cost | $16,000 per worker |
Produce at a level rate using regular time production only. Backlogs are allowed in any month except December. Ending inventory is allowed in any month. Ending inventory for December should be as low as possible.
- How many units are produced for the year using regular time production?
A) Less than 1,900,000
B) Between 1,900,000 and 2,100,000
C) Between 2,100,001 and 2,300,000
D) More than 2,300,000
- After hiring or firing any workers in the first month, how many workers are required throughout the year following the level production strategy?
A) 15
B) 16
C) 17
D) 18
- What is the hiring or firing cost in the first month following the level production strategy?
A) Between $0 and $10,000
B) Between $10,001 and $20,000
C) Between $20,001 and $30,000
D) Between $30,001 and $40,000
- What are the total costs incurred following the level production strategy?
A) Less than $123,000,000
B) Between $123,000,001 and $123,100,000
C) Between $123,100,001 and $123,200,000
D) Greater than $123,200,001
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