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Aggregate Planning: level capacity and chase demand strategy
A small manufacturing plant is considering their aggregate plan for the next fiscal year. They are limited to a maximum number of 40 FTEs each quarter. Their forecasted demand for next year is:
Quarter 1 2 3 4Demand 12520 15000 11880 14680
They do not consider hiring or firing costs but have the following production parameters.
Labor Standard = 1.6 hours/itemRegular Time Labor Cost = $10/hourBeginning Annual Inventory Level = 500Ending Annual Inventory Level = 500Unit Inventory Carrying Cost = $4/item/quarterAny overtime labor in a quarter is time and a half.(Assume 40 hours/week, 52 weeks/year, and 4 quarters/year.)
1. For next fiscal year, find their annual regular time direct labor cost and their overtime direct labor cost based on a level capacity aggregate planning strategy.
2. For next fiscal year, find their annual regular time direct labor cost and their overtime direct labor cost based on a chase demand aggregate planning strategy.
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