Question

Given the projected demands for the next six months, prepare an aggregate plan that uses inventory, regular time and overtime, subcontracting and backorders. The plan must wind up with no units in ending inventory in Period 6. Regular time capacity is 150 units per month. Overtime capacity and subcontracting capacity are 20 units per month each. Overtime cost is $30 per unit, subcontracting cost is 40 per unit, and backorder cost is $20 per unit, inventory holding cost is $5 per unit, regular time cost of $20 per unit, and beginning inventory is zero.
month forecast

1 180

2 170

3 140

4 150

5 130

6 150

Answer 1

The plan for next six months should consider a. the plan should aim to maximize production, b. reduce inventory and c. minimize overtime cost.

Plan details and Cost details provided below

INVENTORY PROJECTION
Period	1	2	3	4	5	6
Forecast	180	170	140	150	130	150
Beginning Inventory	0	-10	-30	-20	-20	0
Regulgar Capacity	150	150	150	150	150	150
Overtime capacity	20	0
End Inventory	-10	-30	-20	-20	0	0
COST PROJECTION
Period	1	2	3	4	5	6
Regulgar Capacity	$          3,000	$        3,000	$        3,000	$        3,000	$        3,000	$        3,000
Overtime capacity	$              600	$               -	$               -	$               -	$               -	$               -
Holding Cost	$                 -	$               -	$               -	$               -	$               -	$               -
Back Order	$              200	$           600	$           400	$           400	$               -	$               -
Total Cost	$        20,200

Total regular cost = $ 18600

total backorder cost = $ 1600

total cost = $20200

ALTERNATIVELY: