Developing the six-month aggregate production plan

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Reference no: EM132258622

(ALL NUMBERS ARE CORRECT) Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are. The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4. The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. TABLE 13-3 Monthly Demand at Soda Galore Month Demand Forecast January 16,000 cases February 36,000 cases March 32,000 cases April 32,000 cases May 20,000 cases June 164,000 cases Total Demand 300,000 cases Average Monthly Demand 50,000 cases TABLE 13-4 Soda Galore Planning Data Current workforce 10 workers Average monthly output per worker 2,000 cases per month Inventory holding cost $ 0.70 per case per month Regular wage rate $ 36 per hour Regular production hours/month/worker 200 hours Overtime wage rate $ 54.00 per hour Hiring cost $ 1,000 per worker Subcontracting cost $ 5.80 per case Firing/layoff cost $ 1,500 per worker Beginning inventory 6,000 (all safety stock) Assume that employees negotiate an increase in the regular production wage rate to $40 per hour and $60 per hour for overtime. Also assume that Soda Galore always plans to hold at least 6,000 cases of safety stock to meet unanticipated customer demand. Assume that hiring and layoff/firing, if necessary, occur at the beginning of the month. a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.) b. Determine the cost of the level production plan. c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "0" wherever required.) d. Determine the cost of the chase production plan. e. After much internal discussion, the company decides to maintain a permanent workforce of 10 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production.(Leave no cells blank - be certain to enter "0" wherever required.) f. Determine the cost of the hybrid production plan. Use the overtime cost.

Reference no: EM132258622

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