Create a level production plan

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Reference no: EM13722462

The Great Sounds company manufactures a family of speakers with two different models. The speaker's demand also shows seasonal behavior with an increase towards spring and summer. The plant's current production capacity is 3200 units. The cost of changing the level of production is $11 per unit. The cost of carrying inventory is $3 per unit per period. The initial inventory is 300 units and the ending inventory should be 550 units. Last December, production was 3200 units.

The S&OP team prepared a monthly forecast and is using it to create a level production plan for the first 6 months and calculate the total cost.

Month			Jan	Feb	Mar	Apr	May	Jun	Total
Forecast (demand)			1400	2100	3500	4200	4900	5250	21350
Planned production		I 3200
Change in capacity
Cost of capacity change
Planned inventory	I 300							550
Cost of carrying inventory

Total cost $

Use the same monthly forecast to create an alternative chase production plan and use the costs information given above to calculate the total cost. For the chase strategy the company policy is to keep an inventory of 100 units every month from January to June.

Month		Jan	Feb	Mar	Apr	May	Jun	Total
Forecast (demand)		1400	2100	3500	4200	4900	5250	21350
Planned production	I 3200
Change in capacity
Cost of capacity chanRe
Planned inventory I 300							100
Cost of carrying inventory

Total cost $

Select the plan with the lowest cost and convert it to a weekly plan by dividing monthly forecast, planned production and inventory by the number of weeks. This will be the basis for the MPS.

Production Plan					January					February
Week		3	- 8	10	- 15	17 - 22	24	- 29	31	-5	7-12	14 - 19	21	- 26
Forecast
Production Plan
Inventory	I 300

Reference no: EM13722462

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