Problem 13-1 (Algo) Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are. The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4. The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. TABLE 13-3 Monthly Demand at Soda Galore Month January February March April May June Total Demand Average Monthly Demand Demand Forecast 16,800 cases 24,000 cases 32,000 cases 32,000 cases 24,800 cases 136,000 cases 264,000 cases 44,000 cases TABLE 13-4 Soda Galore Planning Data Current workforce Average monthly output per worker Inventory holding cost Regular wage rate Regular production hours/month/worker Overtime wage rate Hiring cost Subcontracting cost Firing/layoff cost Beginning inventory 6 workers 4,000 cases per month $ 0.80 per case per month $ 36.00 per hour 250 hours $ 54.00 per hour $ 1,000 per worker $ 3.20 per case $ 1,500 per worker 4,000 (all safety stock) Assume that employees negotiate an increase in the regular production wage rate to $40 per hour and $60 per hour for overtime. Assume Soda Galore always plans to hold at least 4,000 cases of safety stock to meet unanticipated customer demand. Also assume that hiring and layoff/firing, if necessary, occur at the beginning of the month. a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.) Level Production Plan Month Demand Hire Workers Required (4,000 cases/worker) 11 Jan. 16,000 5 Ending Inventory 32,000 52,000 64.000 Fire layoff 0 24,000 11 0 32,000 Regular Overtime or Subcontract Production Production 44,000 0 44,000 0 44,000 0 0 44,000 0 44,000 0 44,000 0 264,000 0 11 0 0 11 0 Feb. March April May June Total 0 76,000 96.000 4.000 11 0 32,000 24,000 136,000 264,000 0 11 0 0 324.000 5 0 b. Determine the cost of the level production plan. Total cost $ 858,200 c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "O" wherever required.) (Leave no cells blank - be certain to enter "0" wherever required.) Ending Inventory Hire Workers Required (4,000 cases/worker) 4 Fire layoff 4,000 0 2 4 0 0 Chase Production Plan : Adjust Workforce Size Month Demand Regular Overtime or Subcontract Production Production Jan. 16,000 16,000 0 Feb. 24,000 16,000 8,000 March 32.000 16,000 16,000 April 32,000 16,000 16,000 May 24,000 16,000 8,000 June 136,000 16,000 120,000 Total 264,000 96,000 168,000 4,000 4.000 4 01 0 4 0 0 4,000 4,000 4 0 0 or 4,000 4 0 24,000 0 2 Overtime or Subcontract Month Demand Ending Regular Production Overtime or Subcontract Production Workers Required (4,000 cases/worker) Hire Inventory Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 0 d. Determine the cost of the chase production plan. Total cost if workforce size adjusted Total cost if overtime production used Total cost if subcontracting used e. After much internal discussion, the company decides to maintain a permanent workforce of 6 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. (Leave no cells blank - be certain to enter "O" wherever required.) Hybrid Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Jan Feb. March April May June Total 0 0 1 0 0 0 0 f. Determine the cost of the hybrid production plan. Use the overtime cost. Total cost Problem 13-1 (Algo) Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are. The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4. The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. TABLE 13-3 Monthly Demand at Soda Galore Month January February March April May June Total Demand Average Monthly Demand Demand Forecast 16,800 cases 24,000 cases 32,000 cases 32,000 cases 24,800 cases 136,000 cases 264,000 cases 44,000 cases TABLE 13-4 Soda Galore Planning Data Current workforce Average monthly output per worker Inventory holding cost Regular wage rate Regular production hours/month/worker Overtime wage rate Hiring cost Subcontracting cost Firing/layoff cost Beginning inventory 6 workers 4,000 cases per month $ 0.80 per case per month $ 36.00 per hour 250 hours $ 54.00 per hour $ 1,000 per worker $ 3.20 per case $ 1,500 per worker 4,000 (all safety stock) Assume that employees negotiate an increase in the regular production wage rate to $40 per hour and $60 per hour for overtime. Assume Soda Galore always plans to hold at least 4,000 cases of safety stock to meet unanticipated customer demand. Also assume that hiring and layoff/firing, if necessary, occur at the beginning of the month. a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.) Level Production Plan Month Demand Hire Workers Required (4,000 cases/worker) 11 Jan. 16,000 5 Ending Inventory 32,000 52,000 64.000 Fire layoff 0 24,000 11 0 32,000 Regular Overtime or Subcontract Production Production 44,000 0 44,000 0 44,000 0 0 44,000 0 44,000 0 44,000 0 264,000 0 11 0 0 11 0 Feb. March April May June Total 0 76,000 96.000 4.000 11 0 32,000 24,000 136,000 264,000 0 11 0 0 324.000 5 0 b. Determine the cost of the level production plan. Total cost $ 858,200 c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "O" wherever required.) (Leave no cells blank - be certain to enter "0" wherever required.) Ending Inventory Hire Workers Required (4,000 cases/worker) 4 Fire layoff 4,000 0 2 4 0 0 Chase Production Plan : Adjust Workforce Size Month Demand Regular Overtime or Subcontract Production Production Jan. 16,000 16,000 0 Feb. 24,000 16,000 8,000 March 32.000 16,000 16,000 April 32,000 16,000 16,000 May 24,000 16,000 8,000 June 136,000 16,000 120,000 Total 264,000 96,000 168,000 4,000 4.000 4 01 0 4 0 0 4,000 4,000 4 0 0 or 4,000 4 0 24,000 0 2 Overtime or Subcontract Month Demand Ending Regular Production Overtime or Subcontract Production Workers Required (4,000 cases/worker) Hire Inventory Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 0 d. Determine the cost of the chase production plan. Total cost if workforce size adjusted Total cost if overtime production used Total cost if subcontracting used e. After much internal discussion, the company decides to maintain a permanent workforce of 6 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. (Leave no cells blank - be certain to enter "O" wherever required.) Hybrid Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Jan Feb. March April May June Total 0 0 1 0 0 0 0 f. Determine the cost of the hybrid production plan. Use the overtime cost. Total cost