Problem 11-7

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	Back-order 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

1.	Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan.

a.

Use regular production. Supplement using inventory, overtime, and subcontracting as needed. No backlogs allowed. (Round your Average values to 1 decimal place. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Period	Mar	Apr	May	Jun	Jul	Aug	Sep	Total
Forecast	50	44	55	60	50	40	51	350
Output
Regular
Overtime
Subcontract
Output - Forecast
Inventory
Beginning
Ending
Average
Backlog
Costs:
Regular	$							$
Overtime
Subcontract
Inventory
Total	$							$

b.

Develop aggregate plan using the same strategy used in part a except that backlogs are allowed here. There should be no backlog remaining at the end of September. Hint: Use a maximum backlog of 5 in any given month. You will need to develop a set of rules regarding which capacity option (regular, overtime, subcontracting) is always preferable, and regarding the timing of these options (i.e., is it cost-effective to build ahead (and thus carry inventory) or to incur a backlog?). (Round your Average values to 1 decimal place. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Period	Mar	Apr	May	Jun	Jul	Aug	Sep	Total
Forecast	50	44	55	60	50	40	51	350
Output
Regular
Overtime
Subcontract
Output - Forecast
Inventory
Beginning
Ending
Average
Backlog
Costs:
Regular	$							$
Overtime
Subcontract
Inventory
Backlog
Total	$							$