Aggregate Production Planning

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Problems on Aggregate Production Planning 1. Planners of a company have obtained information regarding the forecasted demand of a product as follows: Period 1 2 3 4 5 6 Total Forecast 200 200 300 400 500 200 1800 Costs Regular time: $2/unit Overtime: $3/unit Subcontract: $6/unit Inventory: $1/unit Backorder: $5/unit They now want to evaluate a plan that calls for a steady rate of regular-time output, mainly using inventory to absorb the uneven demand but allowing some backlog. Overtime and subcontracting are not used because they want steady output. They intend to start with zero inventory on hand in the first period. Prepare an aggregate plan and determine its cost using the preceding information. Assume a level output rate…show more content…
(b) Compute the total six-month cost using this plan. 7. You are supplied with a monthly demand forecast, an organizational policy of requiring 10% of a month’s forecast as safety stock and the number of operating days available each month. There is no inventory available at the beginning of the first month, January. The following table contains the demand requirements: Period Forecasted demand Operating days January 10,000 22 February 15,000 19 March 30,000 21 April 27,000 21 May 30,000 22 June 16,000 20 The costs for the Organization are as follows: Manufacturing cost/unit: Rs. 100 Inventory holding cost: Rs. 2/unit/month Hourly wage rate: Rs. 8 Stockout cost per unit: Rs. 5 Hourly overtime wage rate: Rs. 12 Subcontracting cost/unit: Rs. 104 Labour hours/unit: 4 hours Layoff cost/worker: Rs. 500 Hiring and training cost: Rs. 400 Three potential plans for the production are: 1. Produce to exact production requirements by varying the size of the workforce on regular hours. Assume there are 250 workers available in January. 2. Maintain a constant workforce of 518 workers. Assume no subcontracting is available and inventory will fluctuate with stockouts filled from the following month’s production. 3. Produce with a fixed workforce of 500 on regular time and subcontract all excess demand over the period production. No stockout is permitted. Find out the cost of each plan. 8. A

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