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Forecast demand with inventory and subcontracting

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Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: QUARTER FORECAST

1. 1,800
2. 1,100
3. 1,600
4. 900

COSTS/OTHER DATA Previous quarter's output = 1,300 cases Beginning inventory = 0 cases Stock-out cost = $150 per case Inventory holding cost = $40 per case at end of quarter Hiring employees = $40 per case Terminating employees = $80 per case Subcontracting cost = $60 per case Unit cost on regular time = $30 per case Overtime cost = $15 extra per case Capacity on regular time = 1,800 cases per quarter John's job is to develop an aggregate plan.

The three initial options he wants to evaluate are: Plan A: a strategy that hires and fires personnel as necessary to meet the forecast. Total cost = $ Plan B: a level strategy. Cost = $ Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and subcontracting. $ Which strategy is the lowest-cost plan?

Reference no: EM132708627

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