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Aggregate planning for widget maker: chase plan with steady

Need to develop aggregate schedule for widget maker. Costs and 4 quarter forecast are provided below.

Quarter Forecast
1 1400
2 1200
3 1500
4 1300

Costs

Prior quarter output 1500 units
starting inven 0 units
stockout cost for back
orders $50/unit
inven holding cost $10/unit for every unit held at end of quarter
hiring workers $40/unit
layoff workers $80/unit
unit cost $30/unit
overtime $15 extra per unit
subcontracting $ na

Questions

a. Try a chase plan by hiring and layoffs to meet forecast as necessary.
b. use a plan that holds employment steady
c. which is the more economical plan.

Solution Preview

See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks

Need to develop aggregate schedule for widget maker. Costs and 4 quarter forecast are provided below.

FOUR QUARTER FORECAST
Quarter Forecast
1 1400
2 1200
3 1500
4 1300

Capacity of present labor force 1500 units per Qtr
Inventory carrying cost 10 $ per unit per year
Initial Inventory 0 Units
Stockout Cost 50 $ per unit
Hiring cost 40 $
Firing cost 80 $
Unit Cost $30
Overtime rate $45
Subcontracting na

a.  Use chase plan by hiring and layoffs to meet forecast as necessary

CHASE STRATEGY
Month Q1 Q2 Q3 Q4 Total
Demand 1,400.00 1,200.00 1,500.00 1,300.00 5,400.00
Production 1,400.00 1,200.00 1,500.00 1,300.00 5,400.00

Beginning inventory - - - - -
Ending inventory - - - - -
Inventory carrying cost - - - - -
Stockout Cost - - - - -
Hiring Cost - - ...

Solution Summary

Shows how to do the aggregate planning for production under the chase system with steady employment.

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