Question # 1 [4 marks]

The VINTAGE WINNIPEG MB Bottling company has recently expanded its bottled regular water operations to include several new flavours. Marketing manager Helen Starling is predicting an improvement in demand based on the new offerings and the increased public awareness of the health benefits of drinking more water. She has prepared aggregate forecast for the next six months, as shown in the following table (quantities are in tank-loads).

Month	May	Jun	Jul	Aug	Aug	Oct	Total
Forecast	50	60	70	90	80	70	420

Production manager Johnson Mar has developed the following information:

Regular production cost $1,000/tank-load

Regular production capacity 60 tank-load using 20 employees

Overtime production cost $1,500 /tank-load

Subcontracting cost$ 1,800/tank-load

Holding cost $200/tank-load/month

Back order cost $5,000/tank-load/month

Beginning inventory 0 tank-load

Among the strategies being considered are:

a- Maximum regular production supplemented by up to 10 tank-loads a month from overtime.

b- Same as 1 but subcontracting of a maximum of 10 tank-loads per month is also allowed.

c- Same as 1 but can use overtime for up to 15 tank-loads a month.

d- Which plan would you recommend?

The objective is to choose the plan that has the lowest total cost. Which plan would you recommend?