Practice_Aggregate_Capacity_Problem

Practice_Aggregate_Capacity_Problem - Aggregate Capacity...

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Unformatted text preview: Aggregate Capacity Problem DeeRaj Inc. is preparing an aggregate production plan for next year. The company expects demand to be 1,000 units in quarter 1; 2,000 units in quarter 2; 4,000 units in quarter 3,; and 3,000 units in quarter 4. The company will have 750 units in inventory at the beginning of the year and desires to maintain that number at the end of each quarter as safety stock. Other information: Regular production cost = $500 per unit Inventory carrying cost = $10/unit/quarter based on quarter-ending inventory Hiring Cost = $2,000 per worker Firing/layoff cost = $3,000 per worker Beginning # of workers = 15 Each worker can produce 100 units per quarter. What is the total cost of a level plan? A chase plan (hiring and firing)? What is the savings of using the lowest cost plan? -1- M Michigan State University, 2004 2008 Level Production Plan Beginning inventory =750 Beginning workers = 15 Qrtr. Demand Regular Overtime/ Ending Production Subcontract Inventory Production 2,500 2,500 2,500 2,500 10000 X X X X X 2,250 2,750 1,250 750 7,000 Workers Required Hire Fire layoff 1 2 3 4 Total 1,000 2,000 4,000 3,000 10000 25 25 25 25 100 10 0 0 0 10 10,000 / 4 quarters = 2,500 I.C.C. = 7,000 units * $10 = 70,000 10,000 units * $500 = 5,000,000 Total Cost = 5,090,000 Hire Cost = 10 * $2,000 = 20,000 -2M Michigan State University, 2004 2008 Chase Production Plan Beginning inventory =750 Beginning workers = 15 Qrtr. Demand Regular Overtime/ Ending Production Subcontract Inventory Production 1000 2000 4000 3000 1000 X X X X X 750 750 750 750 3000 Workers Required 10 20 40 30 100 Hire Fire layoff 5 0 0 10 15 1 2 3 4 Total 1,000 2,000 4,000 3,000 10000 0 10 10 0 20 Cost of Production = 10000 * 500 = 5000000 Hire cost = 30 * 2000 = 60000 Total cost = 5,135,000 Fire cost = 15 * 3000 = 45000 Choose other plan!!! I.C.C. = 3000 units * 10 = 30000 -3M Michigan State University, 2004 2008 ...
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Practice_Aggregate_Capacity_Problem - Aggregate Capacity...

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