What is the total cost of the initial plan

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Reference no: EM131713256

University Press publishes textbooks for the academic market. The printing operations is semi-automated requiring only two people to turn on and off the machines, regardless of the output. The workforce is paid per unit produced. Demand for the four quarters is 5,000, 10,000, 30,000, and 25,000 books respectively. The relevant cost and printing equipment related capacity information are given below.

Regular production cost = $20 per book Regular production max. capacity = 10,000 books per quarter

Overtime production cost =$30 per book Overtime production max. capacity = 5,000 books per quarter

Subcontracting cost =$35 per book Beginning inventory = 0

Quarterly Holding cost =$2 per book

Required

a) Prepare an aggregate production plan using a pure level approach with average demand. What is the total cost of the initial plan?

b) Prepare an aggregate production plan using a pure chase approach for this question, ignore workforce-related costs since the cost information is not provided. What is the total cost of the plan?

c) Compare to the level approach in part a) and b), which approach seems better? Justify your answer briefly.

Reference no: EM131713256

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