Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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A manager is attempting to put together an aggregate production plan for the coming nine months. She has obtained
The company has 20 permanent employees, each of whom can produce 10 units of output per month at a cost of $6 per unit. Inventory holding cost is $5 per unit per month, and back-order cost is $10 per unit per month. The manager is considering a plan that would involve hiring two people to start working in month 1, one on a temporary basis who would work until the end of month 5. The hiring of these two would cost $500. Beginning inventory is 0.
Start with 20 permanent workers. Prepare a minimum cost plan that may use some combination of hiring ($250 per worker), subcontracting ($8 per unit, maximum of 20 units per month, must use for at least three consecutive months), and overtime ($9 per unit, maximum of 25 units per month). The ending inventory in month 9 should be zero with no back orders at the end.
Compute the comprehensive cost analysis. (Hint: Use max. overtime and subcontracting in months 2–4.)
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