Explanation Given information: The given information is as follows: Period 1 2 3 4 5 6 7 8 9 Total Forecast 190 230 260 280 210 170 160 260 180 1,940 There are 20 full-time employees, each of them would produce 10 units of output at the cost of $6 per unit, beginning inventory is 0, inventory carrying cost is $5 per unit, and backlog cost is $10 per unit. There are 20 employees producing 10 units each. Hence, the regular time production is 200 units. Determine the total cost using aggregate planning (Plan A): Supporting calculation: Forecast and regular time capacity are given. The remaining units would be produced using overtime and subcontract. Calculate the difference for the period of Period 1: It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 10 units. Difference = Output − Forecast = ( Regular + Overtime + Subcontract ) − Forecast = ( 200 + 0 + 0 ) − 190 = 10 Calculate the difference for the period of Period 2: It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is -30 units. Difference = Output − Forecast = ( Regular + Overtime + Subcontract ) − Forecast = ( 200 + 0 + 0 ) − 230 = − 30 Note: The calculation repeats for all the periods . Beginning inventory: The initial inventory is given as 0. For the remaining periods, ending inventory of previous period would be the beginning inventory of present period. Ending inventory for Period 1: Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 10 units. Ending inventory = Beginning inventory + Difference between output and forecast = 0 + 10 = 10 Ending inventory for Period 2: Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 0 units. Ending inventory = Beginning inventory + Difference between output and forecast = 10 + ( − 30 ) = − 20 ( Backlog ) Note: The calculation repeats for all the periods . Average inventory for Period 1: It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 5 units. Average inventory = Beginning inventory + Ending inventory 2 = 0 + 10 2 = 5 Average inventory for Period 2: It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 5 units. Average inventory = Beginning inventory + Ending inventory 2 = 10 + 0 2 = 5 Note: The calculation repeats for all the periods . Calculate the regular time cost for Period 1: Regular time cost per unit is given as $6 and regular time unit is given as 200. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $1,200. Regular time cost = Regular time cost per unit × Regular time units = $ 6 × 200 = $ 1 , 200 Calculate the regular time cost for Period 2: Regular time cost per unit is given as $6 and regular time unit is given as 200. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $1,200. Regular time cost = Regular time cost per unit × Regular time units = $ 6 × 200 = $ 1 , 200 Calculate the regular time cost for Period 3: Regular time cost per unit is given as $6 and regular time unit is given as 200. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $1,200. Regular time cost = Regular time cost per unit × Regular time units = $ 6 × 200 = $ 1 , 200 Note: The calculation repeats for all the periods . Calculate the total regular time cost: It is calculated by adding the regular time cost of all the periods. Total regular time cost = Regular time of all the months = ( $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 + $ 1 , 200 ) = $ 10 , 800 Hence, the total regular time cost is $10,800 . Calculate the inventory cost for Period 1: It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $25. Inventory cost = Inventory cost per unit × Average inventory = $ 5 × 5 = $ 25 Calculate the inventory cost for Period 2: It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $25. Inventory cost = Inventory cost per unit × Average inventory = $ 5 × 5 = $ 25 Calculate the inventory cost for Period 3: It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $0. Inventory cost = Inventory cost per unit × Average inventory = $ 5 × 0 = $ 0 Note: The calculation repeats for all the periods . Calculate the total inventory cost: It is calculated by adding the inventory cost of all the months. Total inventory cost = Inventory cost of all the months = $ 25 + $ 25 + $ 0 + $ 0 + $ 0 + $ 0 + $ 50 + $ 50 + $ 0 = $ 150 Hence, the total inventory cost is $150 . Calculate the backorder cost for Period 1: It is calculated by multiplying the backorder cost and the backlog. Hence, the backorder cost is $0. Backorder cost = Backorder cost per unit × Backlogs = $ 10 × 0 = $ 0 Calculate the backorder cost for Period 2: It is calculated by multiplying the backorder cost and the backlog. Hence, the backorder cost is $200. Backorder cost = Backorder cost per unit × Backlogs = $ 10 × 20 = $ 200 Calculate the backorder cost for Period 3: It is calculated by multiplying the backorder cost and the backlog. Hence, the backorder cost is $800. Backorder cost = Backorder cost per unit × Backlogs = $ 10 × 80 = $ 800 Note: The calculation repeats for all the months . Calculate the total backorder cost: It is calculated by adding the backorder cost of all the months. Total backorder cost = Backorder cost of all the months = ( $ 0 + $ 200 + $ 800 + $ 1 , 600 + $ 1 , 700 + $ 1 , 400 + $ 1 , 000 + $ 1 , 600 + $ 1 , 400 ) = $ 9 , 700 Hence, the total backorder cost is $9,700 . Calculate the total cost of the plan: It is calculated by adding the total regular time cost, overtime cost, subcontract cost, and inventory cost. Total cost of the plan = ( Total regular time cost + Total overtime cost + Total subcontract cost + Total inventory cost + Total backorder cost ) = $ 10 , 800 + $ 0 + 0 + $ 150 + $ 9 , 700 = $ 20 , 650 Hence, the total cost of the plan is $20,650 . Determine the total cost using aggregate planning (Plan B): Overtime cost is $9 per unit and maximum overtime unit is 25units. Ending inventory on Period 9 must be zero. Limit on backlogs is 60 units per period.

14th Edition

ISBN: 9781265502942

Author: Stevenson

Publisher: MCG CUSTOM

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Aggregate Planning Strategies

On the basis of the demand forecast, an organization can complete its business plans. When the business plans are complete, an organization can work backward from the completed total sales to the raw materials needed. Thus, annual and quarterly plans are…

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Chapter 11, Problem 12P

Summary Introduction

To determine: The minimized total cost using aggregate planning

Introduction: The aggregate plan is the output of sales and operations planning. The major concern of aggregate planning is the production time and quantity for the intermediate future. Aggregate planning would encompass a time prospect of approximately 3 to 18 periods.

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Chapter 11, Problem 11P

Chapter 11, Problem 13P

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Jill wants you to consider a hybrid aggregate plan, usingup to the maximum overtime per employee for any periodwhere demand cannot be satisfi ed with the current regular-timeproduction and the available inventory. Back orders can occur.(a) Show what would happen if this plan were implemented.(b) Calculate the costs associated with this plan.(c) Evaluate the plan in terms of cost, customer service,operations, and human resources

Given the projected demands for the next six months, prepare aggregate plan must wind up with no units in ending inventory in Period 6. Regular time capacity is 150 units per month. Overtime cost is $20 per unit, backorder cost is $30 per unit, inventory holding cost is $10 per unit based on maximum, subcontracting cost is $40 per unit, regular time cost of $20 per unit, and beginning inventory is 10. Month 1 2 3 45 6 Forecast 150 170 140 160 130 160 a. Prepare an aggregate plan with inventory and backlog allowed. Overtime and subcontracting are not allowed. b. Prepare an aggregate plan if the management decided to switch to chase strategy. They only allow backlog if absolutely needed. Regular production capacity is now 160.

Although the BackPack Company has always used a levelaggregate plan, Jill is interested in evaluating chase aggregateplans also. She has asked you to calculate how many hires and fi reswould be necessary to adjust capacity to meet demand exactlyeach period. If necessary, incur some undertime. Calculate thenumber of workers needed each period.

Chapter 11 Solutions

OPERATIONS MANAGEMENT (LL) W/CONNECT

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