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Aggregate production plan

Forecast for the next 12 months for x-ray machines are shown in the table below.

Month Demand
January 1550
February 1400
March 1200
April 1600
May 2000
June 2400
July 2500
August 2500
September 2000
October 1900
November 1750
December 1600

The standard hours required to produce one unit of the product is 15 hours. Regular hour wage rate per worker per hour is $25. Workers work 8 hours a day for 22 days a month. Undertime is paid at the same rate as regular time. If overtime is used, it is limited to 25% of regular hours each month per worker. Overtime wages are paid on actual hours of overtime used at the rate of 150% of regular hourly wage rate. Hiring cost per worker is $4,000 and firing cost is $5,000 per worker. Carrying cost per unit per month is $50. Assume a beginning inventory of 75 units. A safety stock of 25 units must be maintained each month. At present there are 125 workers on the payroll. The number of workers in the roll at the end of December must be 125.

? Scenario 1: Pure "Chase" strategy
? Scenario 2: Pure "Level" strategy
? Scenario 3: Mixed Strategy In this scenario, total production must equal net demand. In
other words, no inventory is accumulated as anticipation inventory. However, the number workers on the payroll is required to be kept constant at a level equal to the number of workers needed to produce the largest monthly demand with regular time and maximum allowed overtime. Then, if the regular-time production capacity is sufficient to meet the demand of a given month, regular-time production is set equal to the demand and no overtime is used. Otherwise, overtime is used to make up the difference. Thus, total production in a given month consists of regular time production plus, overtime production if regular time production is not sufficient to meet the demand. Therefore, total production in any given month is exactly equal to the demand. No ending inventory is maintained at the end of each month except safety stock.
? Scenario 4: Mixed strategy II with Solver.
Prepare a summary sheet giving the cost of all the plans as below:
Strategy Chase Level Mixed I Mixed - Solver
Labor cost
O.T. Cost
Carrying cost
Hiring cost
Firing cost
Total cost


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The word document provides formulation, conceptual inputs with formulas and the excel file contains all the computations and explanations.