1. McPherson Refrigeration Limited has hired you (being the smart Grand Valley State University graduate) to develop an aggregate plan for their state-of-art compressor equipment. The sales forecast for the next 12 months is as follows:

Month: Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Forecast: 4400 4400 6000 8000 6600 11800 13000 11200 10800 7600 6000 5600

Their cost structure is given as follows:

An hourly worker is paid $2,400 per month for producing 480 units per year at an average.

At an average, a unit produced in overtime costs $82.50.

Cost of hiring and training a worker is $1,800.

Cost of laying-off a worker is $1,200.

Inventory holding cost per month is estimated at $8 per compressor.

The McPhersons also have institutionalized the following constraints:

Maintain a minimum inventory of 200 units each month of the plan inclusive of December (Safety Stock)

Use an overtime of 20% in the three months of peak demand (if the overtime strategy is used).

The inventory records file shows that a beginning-of-plan inventory of 240 units is available and HRD have indicated that a workforce level of 160 will be operative in the month of December prior to the plan. Assuming that McPherson's allows no shortages at the planning stage, develop an aggregate plan for them using the following strategies.

Level workforce with no overtime

Level workforce with overtime

Chase

Purely on cost basis which plan would you recommend?