Question

Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are.

January	16000
February	24,000
March	32,000
April	32,000
May	60,000
June	88,000
Total Demand	252,000
Average Monthy Demand	42,000

Current Workforce	10 workers
Average Monthly Output per worker	2000 cases per month
Inventory holding cost	$0.30 per month
Regular Wage rate	$36 per hour
Regular production hours/ month/ worker	100 hours
Overtime wage rate	$54 per hour
Hiring cost	$1000 per worker
Firing cost	$1500 per worker
Subcontracting cost	$2.90 per case
Beginning inventory	7000 (all safety stock)

a)Determine the cost of the chase production plan.

a.1) Total cost is workforce size adjusted

a.2) Total cost if overtime production used

a.3)Total cost if subtracting used

b) After much internal discussion, the company decides to maintain a permanent workforce of 10 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. Determine the cost of the hybrid production plan. Use the overtime cost.

Answer 1

Solution :

Part A.1 : Total cost is workforce size adjusted : 505,200

Part A.2 : Total cost if overtime production used: 586,200

Part A.C : Total cost if subtracting used : 612,600

Part B : Total Cost : 586,200 (Similar to Case A.2)