Answer to Question #159762 in Economics of Enterprise for Alex

Question

Nowjuice, Inc., produces Shakewell® fruit juice. A planner has developed an aggregate forecast for demand (in cases) for the next six months.

MonthMayJunJulAugSepOct  Forecast4,0004,8005,6007,2006,4005,000

Use the following information to develop aggregate plans.

  Regular production cost$10per case  Regular production capacity5,000cases  Overtime production cost$16per case  Subcontracting cost$20per case  Holding cost$1per case per month  Beginning inventory0

1.Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan.

a.Use level production. Supplement using overtime as needed. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

  Period                 May                 Jun                 Jul                 Aug                 Sep               Oct               Total  Forecast4,0004,8005,6007,2006,4005,00033,000  Output      Regular      Overtime    Output - Forecast    Inventory      Beginning    Ending      Average    Backlog      Costs:      Regular$$       Overtime    Inventory    Back orders      Total$$     

b.Use a combination of overtime (500 cases per period maximum), inventory, and subcontracting (500 cases per period maximum) to handle variations in demand. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

  Period                 May                 Jun                 Jul               Aug               Sep               Oct             Total  Forecast4,0004,8005,6007,2006,4005,00033,000  Output      Regular      Overtime    Subcontract    Output - Forecast    Inventory      Beginning     Ending      Average    Backlog      Costs:      Regular$$       Overtime      Subcontract    Inventory    Back orders      Total$$     

c.Use overtime up to 750 cases per period and inventory to handle variations in demand. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

  Period                  1                  2                  3                  4                  5                  6              Total  Forecast4,0004,8005.6007,2006,4005,00033,000  Output      Regular      Overtime    Output - Forecast    Inventory      Beginning      Ending      Average    Backlog      Costs:      Regular$$       Overtime    Hire/Lay off    Inventory    Back orders      Total$$     

2.Which plan has the lowest total cost?

SecondFirstThirdNeither

Answer 1

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