Question

The S&OP team at Kansas Furniture, has received the following estimates of demand requirements:

July	Aug.	Sept.	Oct.	Nov.	Dec.
1,800	1,200	1,400	1,800	1,000	1,600

Assume regular-time production cost of $50 per unit, inventory carrying costs of $25 per unit per month, and 100 unit beginning inventory at the beginning of July. Create an aggregate plan that would produce at a steady rate of 1,300 units per month and subcontract additional units at a $60 per unit premium cost. What is the cost of this plan?

	Demand	Beginning     Inventory	Regular Time Production	Subcontract	Ending Inventory
July	1800
Aug.	1200
Sept.	1400
Oct.	1800
Nov.	1000
Dec.	1600
Total

Regular Time Production Cost =                                                                        

Subcontract Cost =                                                                      

Inventory Cost =                                                                                

Total Cost =    

Answer 1

	Demand	Beginning inventory	Regular time production	Subcontract	Ending inventory
July	1800	100	1300	400	0
Aug	1200	0	1300	0	100
Sept	1400	100	1300	0	0
Oct	1800	0	1300	500	0
Nov	1000	0	1300		300
Dec	1600	300	1300	300	0
		Units	7800	1200	400
		Cost	50	60	25	Total cost
			390000	72000	10000	472000

Regular Time Production Cost = $390000   

Subcontract Cost = $72000   

Inventory Cost = $10000

Total Cost = $472000