Concept explainers
Dwayne Cole, owner of a Florida firm that manufactures display cabinets, develops an 8-month aggregate plan. Demand and capacity (in units) are
The cost of producing each unit is $1,000 on regular time, $1,300 on overtime, and $1,800 on a subcontract. Inventory carrying cost is $200 per unit per month. There is no beginning or ending inventory in stock, and no backorders are permitted from period to period.
Let the production (workforce) vary by using regular time first, then overtime, and then subcontracting.
a) Set up a production plan that minimizes cost by producing exactly what the demand is each month. This plan allows no backorders or inventory. What is this plan’s cost?
b) Through better planning, regular time production can be set at exactly the same amount, 275 units, per month. If demand cannot be met there is no cost assigned to shortages and they will not be filled. Does this alter the solution?
c) If overtime costs per unit rise from $1,300 to $1,400, will your answer to (a) change? What if overtime costs then fall to $1,200?
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PRIN OF OPS MGMT (LL) >C<
- Jerusalem Medical Ltd., an Israeli producer of portable kidney dialysis units and other medical products, develops a 4-month aggregate plan. Demand and capacity (in units) are forecast as follows: Capacity Source Month 1 Month 2 Month 3 Month 4 Labor Regular time 245 265 280 300 Overtime 15 24 26 22 Subcontract 14 17 20 15 Demand 260 306 316 305 The cost of producing each dialysis unit is $875 on regular time, $1,310 on overtime, and $1,500 on a subcontract. Inventory carrying cost is $100 per unit per month. There is to be no beginning or ending inventory in stock and backorders are not permitted. Minimizing cost using the transportation method, the optimal cost is $nothing (enter your response as a whole number).arrow_forwardJerusalem Medical Ltd., an Israeli producer of portable kidney dialysis units and other medical products, develops a 4-month aggregate plan. Demand and capacity (in units) are forecast as follows: Capacity Source Month 1 Month 2 Month 3 Month 4 Labor Regular time 245 265 300 300 Overtime 15 24 26 22 Subcontract 14 15 13 15 Demand 260 304 331 305 The cost of producing each dialysis unit is $875 on regular time, $1310 on overtime, and $1500 on a subcontract. Inventory carrying cost is $100 per unit per month. There is to be no beginning or ending inventory in stock and backorders are not permitted. Minimizing cost using the transportation method, the optimal cost is ???$ (enter your response as a whole number).arrow_forwardHow is it possible for you to solve the Aggregate Planning problem?arrow_forward
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- Spectrum Hair Salon is considering expanding itsbusiness, as it is experiencing a large growth. Th e question iswhether it should expand with a bigger facility than needed,hoping that demand will catch up, or with a small facility,knowing that it will need to reconsider expanding in three years.Th e management at Spectrum has estimated the followingchances for demand:• Th e likelihood of demand being high is 0.70.• Th e likelihood of demand being low is 0.30.Estimated profi ts for each alternative are as follows:• Large expansion has an estimated profi tability of either$100,000 or $70,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $50,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at this point, the profi tability is expected tobe $90,000. If it does not expand further, the profi tability isexpected to be $60,000.arrow_forward3) Gang Aft Agley, a manufacturing company, faces the aggregate planning problem shown in the table below. Cost of regular production is $5 per unit, the cost of producing the same unit on overtime is $7, the cost of subcontracting is $8 per unit, and the cost of carrying a unit in inventory from one month to the next is $2. January February March April May Forecast 500 750 1200 650 300 Beginning Inventory 100 Regular Time Overtime Subcontracting Ending Inventory The labor contract at the plant prohibits both overtime and subcontracting output to exceed 300 units in any five month window. The plant capacity is 500 units per month produced using two shifts, regardless of the number of days in a month. By policy, management wants to avoid stockouts. Formulate the aggregate plan using linear programming and solve it using Solver.arrow_forwardProblem 11-11 (Static) A manager is attempting to put together an aggregate plan for the coming nine months. She has obtained a forecast of expected demand for the planning horizon. The plan must deal with highly seasonal demand; demand is relatively high in periods 3 and 4, and again in period 8, as can be seen from the following forecasts. Period 1 2 3 4 5 6 7 8 9 Total Forecast 190 230 260 280 210 170 160 260 180 1,940 The department now has 20 full-time employees, each of whom produces 10 units of output per period at a cost of $6 per unit. Beginning inventory for period 1 is zero. Inventory carrying cost is $5 per unit per period, and backlog cost is $10 per unit per period. The manager has decided to use part-time workers to assist during seasonal peaks. The cost per unit, including hiring and training, is $11. The output rate is 10 units per worker per period for all workers. A maximum of 10 part-time workers can be used, and the same number of part-time workers…arrow_forward
- Mick Karra is the manager of MCZ Drilling products which produces a variety of especially valves for oil field equipment. Recent activity in the oil fields has cause demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered, and the size of the facility would not be the same in each location Thus, overtime might be necessary at times. The folowing table gives the total monthly cost (in 1000s) for each possible location under each demand posibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand Demand is Low Demand is medium Demand is High Ardmore, OK 85 110 150 Sweetwater, TX 90 100 120 Lake Charles, LA 110 120 130 (a) Which location would be selected based on the optimistic criterion? (b) which location would be selected based on the pessimistic criterion? (c) which location would be selected based on the…arrow_forward3. What information is necessary for an operations manager to create the aggregate plan? List the capacity options and demand options of aggregate planning and explain the difference between them. Which strategy or model always gives the aggregate plan with the minimum total cost?arrow_forwardThe successful cat food company "El gato gordo" supplies food to most of the wholesale veterinary stores in the country. Currently, they are working on the production planning for October 2020, to be delivered at the end of that month. Based on historical information from past years, they have concluded that a production of 11,500 bags will be sufficient to meet their demands. For the month of October, the company will work 22 days, Monday through Friday, in two shifts: 7 a.m. to 4 p.m., and 4 p.m. to 12 a.m., considering one hour of lunch in each shift. Determine the takt time in terms of production per hour and per minute.arrow_forward
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