Planners for a company that makes several models of skateboards are about to pre
ID: 1227347 • Letter: P
Question
Planners for a company that makes several models of skateboards are about to prepare the aggregate plan that will cover six periods. They have assembled the following information:
They now want to evaluate a plan that calls for a steady rate of regular-time output, mainly using inventory to absorb the uneven demand but allowing some backlog. Overtime and subcontracting are not used because they want steady output. They intend to start with zero inventory on hand in the first period. Assume a level output rate of 300 units (skateboards) per period with regular time (i.e., 1,800/6 = 300). Note that the planned ending inventory is zero. There are 15 workers, and each can produce 20 skateboards per period.
Suppose that the regular output rate will drop to 290 units per period due to an expected change in production requirements. Costs will not change. Prepare an aggregate plan and compute its total cost for each of these alternatives:
Use overtime at a fixed rate of 20 units per period as needed. Plan for an ending inventory of zero for period 6. Backlogs cannot exceed 90 units per period. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Use subcontracting at a maximum rate of 50 units per period; the usage need not be the same in every period. Have an ending inventory of zero in the last period. Again backlogs cannot exceed 90 units in any period. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Planners for a company that makes several models of skateboards are about to prepare the aggregate plan that will cover six periods. They have assembled the following information:
Explanation / Answer
In this problem a planner has to plan for the production. Six years forecast quantities are given. You can satisfy requirements through normal production, overtime production and subcontract work. Also there are cost of inventory and back order.
Three situations are stated. They are-
1. Normal steady production of 300 unit per year. No overtime or subcontract work is required. Also last years invetory is nil.
2. In situation (a) of the problem, normal production per year is 290. If overtime is required, then 20 hours fixed yearly overtime is allowed. Back order is permitted upto maximum 90 units.No end inventory at 6th year.
3. In situation (b) of the problem, subcontracting is permitted for a maximum of 50 units per year. Back order is maximum 90 units. Again 6th years end inventory is 0.
Thus costs under three methods are stated below:
Answer: Note that cost of normal steady 300 hours will have minimum total cost of 6 years. So Answer is donot go for situation (a) or (b).
Answer: Neither.
Production schedule when normal production is steady 300 units Periods 1 2 3 4 5 6 total 1. Forecast 200 200 300 400 500 200 1800 2. Normal steady production 300 300 300 300 300 300 3. Beginning inventory 0 100 200 200 100 0 3. End inventory [3+2-1] 100 200 200 100 0 0 4. Backlog 0 0 0 0 -100 0 Labor cost of normal production @$2 per unit 600 600 600 600 600 600 3600 Labor cost of overtime production @$6 per unit 0 0 0 0 0 0 0 Subcontracting cost @ $5 per unit 0 0 0 0 0 0 0 Inventory cost @$1 per unit 100 200 200 100 0 0 600 Backlog cost @$6 per unit 0 0 0 0 600 0 600 Total cost 700 800 800 700 1200 600 4800 Production schedule when yearly production is 290 Periods 1 2 3 4 5 6 total 1. Forecast 200 200 300 400 500 200 1800 2. Normal steady production 290 290 290 290 290 290 3. Overtime production 20 20 20 0 0 0 4. Total production 310 310 310 290 290 290 3. Beginning inventory 0 110 220 230 120 0 3. End inventory [3+2-1] 110 220 230 120 0 0 4. Backlog 0 0 0 0 -90 0 Labor cost of normal production @$2 per unit 580 580 580 580 580 580 3480 Labor cost of overtime production @$6 per unit 120 120 120 0 0 0 360 Subcontracting cost @ $5 per unit 0 0 0 0 0 0 0 Inventory cost 110 220 230 120 0 0 680 Backlog cost @$6 per unit 0 0 0 0 540 0 540 Total cost 810 920 930 700 1120 580 5060 Production schedule when yearly production is 290 and maximum subcontracting is 50 backlog 90 units Periods 1 2 3 4 5 6 total 1. Forecast 200 200 300 400 500 200 1800 2. Normal steady production 290 290 290 290 290 290 3. Subcontracting 0 0 0 10 50 0 4. Total production 290 290 290 300 340 290 3. Beginning inventory 0 90 180 170 70 0 3. End inventory [3+2-1] 90 180 170 70 0 0 4. Backlog 0 0 0 0 -90 0 Labor cost of normal production @$2 per unit 580 580 580 580 580 580 3480 Labor cost of overtime production @$6 per unit 0 0 0 0 0 0 0 Subcontracting cost @ $5 per unit 0 0 0 50 250 0 300 Inventory cost 90 180 170 70 0 0 510 Backlog cost @$6 per unit 0 0 0 0 540 0 540 Total cost 670 760 750 700 1370 580 4830