THE AGGREGATE PLAN In preparation for her decision, Linda gathered the following information: 1. The Stratford plant had the physical capacity to make only 13,000 appliances per month 2. On October 1, MRL employed 160 hourly paid unionized production workers. Their tan year contract, signed in February of last year, called for an increase of $0.75 per hour effective next January 1, bringing the average hourly rate to $10.50. With fringe benefits, the monthly cost to MRL would be abo Under the agreement, overtime was 1.5 times the regular hourly rate but, because not all fringes were affected a worker-month of overtime cost about $3,300. The standard work week was 40 hours. The aggregate plan in effect until December 31 called for a total production workforce of 160 at that time. 3. The personnel department estimated that hiring, training, and related expenses would amount to $1.800 per worker. It also estimated that severance and other layoff expenses would cost a total of $1,200 per worker. The accounting department predicted that it would cost about $8 to hold an appliance in inventory for a month during the next year. Raw materials were readily available from regional sources on short notice. The current aggregate plan, supported by marketing's most recent revised forecasts and the master production schedule, predicted an inventory of 240 finished units on December 31. So minimizing the total cost formulate liner programming and make yearly production plan for her. Forecasting details are Month Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total: Production Plan 4400 4400 6000 8000 6600 11800 13000 11200 10800 7600 6000 5600 95400 Shipment Forecast Production Plan Shipments Il Inventory 240 Extraordinary Labour Costa 160 Number of Workers Hiring Layoffs Worker Months Overtime ||| Cost of Alternative 4 X 1800 = X 1200 = x 8 = Hiring Costs Layoff Costs Inventory Holding Costs Labour Costa Regular Overtime TOTAL COSTS S 2400 = * 3300