Operations Management
Operations Management
13th Edition
ISBN: 9781259667473
Author: William J Stevenson
Publisher: McGraw-Hill Education
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Chapter 11, Problem 8P

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

Chapter 11, Problem 8P, Nowjuice, Inc., produces Shakewell fruit juice. A planner has developed an aggregate forecast for , example  1

Use the following information to develop aggregate plans.

Chapter 11, Problem 8P, Nowjuice, Inc., produces Shakewell fruit juice. A planner has developed an aggregate forecast for , example  2

Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan. Which plan has the lowest total cost? Note: Backlogs are not allowed.

a. Use level production. Supplement using overtime as needed.

b. Use a combination of overtime (500 cases per period maximum), inventory, and subcontracting (500 cases per period maximum) to handle variations in demand.

C. Use overtime up to 750 cases per period and inventory to handle variations in demand.

a)

Expert Solution
Check Mark
Summary Introduction

To determine: The total cost using level strategy of aggregate planning.

Introduction: Level production strategy is a production strategy used to produce at a constant rate. This strategy keeps constant level of workforce and backlog of demand.

Answer to Problem 8P

The total cost of the aggregate plan is $350,800.

Explanation of Solution

Given information:

Regular production cost is $10, overtime production cost is $16, subcontracting cost is $20, holding cost is $1, regular capacity is 5,000 units, and beginning inventory is given as 0 units. In addition to this forecast for 6 months is given as follows:

Month July June July August September October Total
Forecast 4,000 4,800 5,600 7,200 6,400 5,000 33,000

Determine the total cost of the plan:

It is given that regular productions should be used. No backlogs are allowed. Supplements can be satisfied using overtime.

Operations Management, Chapter 11, Problem 8P , additional homework tip  1

Supporting explanation:

Calculate the difference for the month of May:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 1,000 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+0+0)4,000=1,000

Calculate the difference for the month of June:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 1,000 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+0+0)4,800=200

Calculate the difference for the month of July:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is -600 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+0+0)5,600=600

Note: The calculation repeats for all the months.

Beginning inventory:

The initial inventory is given as 0. For the remaining months, ending inventory of previous month would be the beginning inventory of present month.

Ending inventory for the month of May:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 1,000 units.

Ending inventory=Beginning inventory+Difference between output and forecast=0+1,000=1,000

Ending inventory for the month of June:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 1,200 units.

Ending inventory=Beginning inventory+Difference between output and forecast=1,000+200=1,200

Ending inventory for the month of July:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 600 units.

Ending inventory=Beginning inventory+Difference between output and forecast=1,200600=600

Note: The calculation repeats for all the months.

Average inventory for the month of May:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 500 units.

Average inventory=Beginning inventory+Ending inventory2=0+1,0002=500

Average inventory for the month of June:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 1,100 units.

Average inventory=Beginning inventory+Ending inventory2=1,000+1,2002=1,100

Average inventory for the month of July:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 900 units.

Average inventory=Beginning inventory+Ending inventory2=1,200+6002=900

Note: The calculation repeats for all the months.

Calculate the regular time cost for the month of May:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of June:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of July:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Note: The calculation repeats for all the months.

Calculate the total regular time cost:

It is calculated by adding the regular time cost of all the months.

Total regular time cost=Regular time of all the months=$50,000+$50,000+$50,000+$50,000+$50,000+$50,000=$300,000

Hence, the total regular time cost is $300,000.

Calculate the overtime cost for the month of May:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of June:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of July:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of August:

Overtime cost per unit is given as $16 and overtime unit is given as 1,600. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $25,600.

Overtime cost=Overtime cost per unit×Overtime units=$16×16,000=$25,600

Note: The calculation repeats for all the months.

Calculate the total overtime cost:

It is calculated by adding the overtime cost of all the months.

Total overtime cost=Overtime of all the months=$0+$0+$0+$25,600+$22,400+$0=$48,000

Hence, the total overtime cost is 48,000.

Calculate the subcontract cost for the month of May:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Calculate the subcontract cost for the month of June:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Calculate the subcontract cost for the month of July:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Note: The calculation repeats for all the months.

Calculate the total subcontract cost:

It is calculated by adding the subcontract cost of all the months.

Total subcontract cost=Subcontract of all the months=$0+$0+$0+$0+$0+$0=$0

Hence, the total subcontract cost is $0.

Calculate the inventory cost for the month of May:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $500.

Inventory cost=Inventory cost per unit×Average inventory=$1×500=$500

Calculate the inventory cost for the month of June:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $1,100.

Inventory cost=Inventory cost per unit×Average inventory=$1×1,100=$1,100

Calculate the inventory cost for the month of July:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $900.

Inventory cost=Inventory cost per unit×Average inventory=$1×900=$900

Note: The calculation repeats for all the months.

Calculate the total inventory cost:

It is calculated by adding the inventory cost of all the months.

Total inventory cost=Inventory cost of all the months=$500+$1,100+$900+$300+$0+$0=$2,800

Hence, the total inventory cost is $2,800.

Calculate the total cost of the plan:

It is calculated by adding the total regular time cost, overtime cost, subcontract cost, and inventory cost.

Total cost of the plan=(Total regular time cost+Total overtime cost+Total subcontract cost+Total inventory cost+Total backorder cost)=$300,000+$0+$48,000+$2,800+$0=$350,800

Hence, the total cost of the plan is $350,800.

b)

Expert Solution
Check Mark
Summary Introduction

To determine: The total cost using level strategy of aggregate planning.

Introduction: Level production strategy is a production strategy used to produce at a constant rate. This strategy keeps constant level of workforce and backlog of demand.

Answer to Problem 8P

The total cost of the aggregate plan is $356,200.

Explanation of Solution

Given information:

Regular production cost is $10, overtime production cost is $16, subcontracting cost is $20, holding cost is $1, regular capacity is 5,000 units, and beginning inventory is given as 0 units. Maximum subcontract capacity is 500 units and maximum overtime capacity is 500 units. In addition to this forecast for 6 months is given as follows:

Month July June July August September October Total
Forecast 4,000 4,800 5,600 7,200 6,400 5,000 33,000

Determine the total cost of the plan:

It is given that regular productions should be used. No backlogs are allowed. Supplements can be satisfied using overtime.

Operations Management, Chapter 11, Problem 8P , additional homework tip  2

Supporting explanation:

Calculate the difference for the month of May:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 1,500 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+500+0)4,000=1,500

Calculate the difference for the month of June:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 700 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+500+0)4,800=700

Calculate the difference for the month of July:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is -100 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+500+0)5,600=100

Note: The calculation repeats for all the months.

Beginning inventory:

The initial inventory is given as 0. For the remaining months, ending inventory of previous month would be the beginning inventory of present month.

Ending inventory for the month of May:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 1,500 units.

Ending inventory=Beginning inventory+Difference between output and forecast=0+1,500=1,500

Ending inventory for the month of June:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 2,200 units.

Ending inventory=Beginning inventory+Difference between output and forecast=1,500+700=2,200

Ending inventory for the month of July:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 2,100 units.

Ending inventory=Beginning inventory+Difference between output and forecast=2,200100=2,100

Note: The calculation repeats for all the months.

Average inventory for the month of May:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 750 units.

Average inventory=Beginning inventory+Ending inventory2=0+1,5002=750

Average inventory for the month of June:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 1,850 units.

Average inventory=Beginning inventory+Ending inventory2=1,500+2,2002=1,850

Average inventory for the month of July:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 2,150 units.

Average inventory=Beginning inventory+Ending inventory2=2,200+2,1002=2,150

Note: The calculation repeats for all the months.

Calculate the regular time cost for the month of May:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of June:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of July:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Note: The calculation repeats for all the months.

Calculate the total regular time cost:

It is calculated by adding the regular time cost of all the months.

Total regular time cost=Regular time of all the months=$50,000+$50,000+$50,000+$50,000+$50,000+$50,000=$300,000

Hence, the total regular time cost is $300,000.

Calculate the overtime cost for the month of May:

Overtime cost per unit is given as $16 and overtime unit is given as 500. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $8,000.

Overtime cost=Overtime cost per unit×Overtime units=$16×500=$8,000

Calculate the overtime cost for the month of June:

Overtime cost per unit is given as $16 and overtime unit is given as 500. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $8,000.

Overtime cost=Overtime cost per unit×Overtime units=$16×500=$8,000

Calculate the overtime cost for the month of July:

Overtime cost per unit is given as $16 and overtime unit is given as 500. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $8,000.

Overtime cost=Overtime cost per unit×Overtime units=$16×500=$8,000

Note: The calculation repeats for all the months.

Calculate the total overtime cost:

It is calculated by adding the overtime cost of all the months.

Total overtime cost=Overtime of all the months=$8,000+$8,000+$8,000+$8,000+$8,000=$40,000

Hence, the total overtime cost is 40,000.

Calculate the subcontract cost for the month of May:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Calculate the subcontract cost for the month of June:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Calculate the subcontract cost for the month of July:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Note: The calculation repeats for all the months.

Calculate the total subcontract cost:

It is calculated by adding the subcontract cost of all the months.

Total subcontract cost=Subcontract of all the months=$0+$0+$0+$0+$10,000+$0=$10,000

Hence, the total subcontract cost is $10,000.

Calculate the inventory cost for the month of May:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $750.

Inventory cost=Inventory cost per unit×Average inventory=$1×750=$750

Calculate the inventory cost for the month of June:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $1,850.

Inventory cost=Inventory cost per unit×Average inventory=$1×1,850=$1,850

Calculate the inventory cost for the month of July:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $2,150.

Inventory cost=Inventory cost per unit×Average inventory=$1×2,150=$2,150

Note: The calculation repeats for all the months.

Calculate the total inventory cost:

It is calculated by adding the inventory cost of all the months.

Total inventory cost=Inventory cost of all the months=$750+$1,850+$2,150+$1,250+$200+$0=$6,200

Hence, the total inventory cost is $6,200.

Calculate the total cost of the plan:

It is calculated by adding the total regular time cost, overtime cost, subcontract cost, and inventory cost.

Total cost of the plan=(Total regular time cost+Total overtime cost+Total subcontract cost+Total inventory cost+Total backorder cost)=$300,000+$40,000+$10,000+$0+$6,200=$356,200

Hence, the total cost of the plan is $356,200.

c)

Expert Solution
Check Mark
Summary Introduction

To determine: The total cost using aggregate planning.

Introduction: Level production strategy is a production strategy used to produce at a constant rate. This strategy keeps constant level of workforce and backlog of demand.

Answer to Problem 8P

The total cost of the aggregate plan is $353,700.

Explanation of Solution

Given information:

Regular production cost is $10, overtime production cost is $16, subcontracting cost is $20, holding cost is $1, regular capacity is 5,000 units, overtime capacity is 750 units, and beginning inventory is given as 0 units. In addition to this forecast for 6 months is given as follows:

Month July June July August September October Total
Forecast 4,000 4,800 5,600 7,200 6,400 5,000 33,000

Determine the total cost of the plan:

It is given that regular productions should be used. No backlogs are allowed. Supplements can be satisfied using overtime.

Operations Management, Chapter 11, Problem 8P , additional homework tip  3

Supporting explanation:

Calculate the difference for the month of May:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 1,000 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+0+0)4,000=1,000

Calculate the difference for the month of June:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 950 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+750+0)4,800=950

Calculate the difference for the month of July:

It is the calculation of difference between forecast and output. Hence, it can be calculated by subtracting the forecast from the output. Hence, the difference is 150 units.

Difference=OutputForecast=(Regular+Overitme+Subcontract)Forecast=(5,000+750+0)5,600=150

Note: The calculation repeats for all the months.

Beginning inventory:

The initial inventory is given as 0. For the remaining months, ending inventory of previous month would be the beginning inventory of present month.

Ending inventory for the month of May:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 1,000 units.

Ending inventory=Beginning inventory+Difference between output and forecast=0+1,000=1,000

Ending inventory for the month of June:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 1,950 units.

Ending inventory=Beginning inventory+Difference between output and forecast=1,000+950=1,950

Ending inventory for the month of July:

Ending inventory can be determined by adding the beginning inventory and difference between output and forecast. Hence, the ending inventory is 2,100 units.

Ending inventory=Beginning inventory+Difference between output and forecast=1,950+150=2,100

Note: The calculation repeats for all the months.

Average inventory for the month of May:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 500 units.

Average inventory=Beginning inventory+Ending inventory2=0+1,0002=500

Average inventory for the month of June:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 1,475 units.

Average inventory=Beginning inventory+Ending inventory2=1,000+1,9502=1,475

Average inventory for the month of July:

It is calculated by taking an average of beginning inventory and ending inventory. Hence, the average inventory is 2,025 units.

Average inventory=Beginning inventory+Ending inventory2=1,950+2,1002=2,025

Note: The calculation repeats for all the months.

Calculate the regular time cost for the month of May:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of June:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Calculate the regular time cost for the month of July:

Regular time cost per unit is given as $10 and regular time unit is given as 5,000. Regular time cost is calculated by multiplying regular time unit and regular time cost per unit. Hence, the regular time cost is $50,000.

Regular time cost=Regular time cost per unit×Regular time units=$10×5,000=$50,000

Note: The calculation repeats for all the months.

Calculate the total regular time cost:

It is calculated by adding the regular time cost of all the months.

Total regular time cost=Regular time of all the months=$50,000+$50,000+$50,000+$50,000+$50,000+$50,000=$300,000

Hence, the total regular time cost is $300,000.

Calculate the overtime cost for the month of May:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of June:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of July:

Overtime cost per unit is given as $16 and overtime unit is given as 0. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $0.

Overtime cost=Overtime cost per unit×Overtime units=$16×0=$0

Calculate the overtime cost for the month of August:

Overtime cost per unit is given as $16 and overtime unit is given as 1,600. Overtime cost is calculated by multiplying overtime unit and overtime cost per unit. Hence, the overtime cost is $25,600.

Overtime cost=Overtime cost per unit×Overtime units=$16×16,000=$25,600

Note: The calculation repeats for all the months.

Calculate the total overtime cost:

It is calculated by adding the overtime cost of all the months.

Total overtime cost=Overtime of all the months=$0+$0+$0+$25,600+$22,400+$0=$48,000

Hence, the total overtime cost is 48,000.

Calculate the subcontract cost for the month of May:

Subcontract cost per unit is given as $20 and subcontract unit is given as 0. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $0.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×0=$0

Calculate the subcontract cost for the month of June:

Subcontract cost per unit is given as $20 and subcontract unit is given as 750. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $12,000.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×750=$12,000

Calculate the subcontract cost for the month of July:

Subcontract cost per unit is given as $20 and subcontract unit is given as 750. Subcontract cost is calculated by multiplying subcontract unit and subcontract cost per unit. Hence, the subcontract cost is $12,000.

Subcontract cost=Subcontract cost per unit×Subcontract units=$20×750=$12,000

Note: The calculation repeats for all the months.

Calculate the total subcontract cost:

It is calculated by adding the subcontract cost of all the months.

Total subcontract cost=Subcontract of all the months=$0+$12,000+$12,000+$12,000+$12,000+$0=$48,000

Hence, the total subcontract cost is $48,000.

Calculate the inventory cost for the month of May:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $500.

Inventory cost=Inventory cost per unit×Average inventory=$1×500=$500

Calculate the inventory cost for the month of June:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $1,475.

Inventory cost=Inventory cost per unit×Average inventory=$1×1,475=$1,475

Calculate the inventory cost for the month of July:

It is calculated by average balance inventory cost and the average inventory units. Hence, the inventory cost is $2,025.

Inventory cost=Inventory cost per unit×Average inventory=$1×2,025=$2,025

Note: The calculation repeats for all the months.

Calculate the total inventory cost:

It is calculated by adding the inventory cost of all the months.

Total inventory cost=Inventory cost of all the months=$500+$1,475+$2,025+$1,375+$325+$0=$5,700

Hence, the total inventory cost is $5,700.

Calculate the total cost of the plan:

It is calculated by adding the total regular time cost, overtime cost, subcontract cost, and inventory cost.

Total cost of the plan=(Total regular time cost+Total overtime cost+Total subcontract cost+Total inventory cost+Total backorder cost)=$300,000+$0+$48,000+$5,700+$0=$353,700

Hence, the total cost of the plan is $350,800.

Conclusion

Conclusion: Plan from Part (a) should be selected, as it has the lowest cost ($350,800).

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NowJuice, Inc. produces bottled pickle juice. A planner has developed an aggregate forecast for demand (in cases) for the next four months. Use the following information to develop an aggregate plan using the LEVEL strategy. Inventory holding cost is $1 per month per case and backlog cost is $5 per month per case. Beginning inventory is zero. Month May June July August Forecast 452 520 600 719   Cost Per Unit Monthly Capacity Regular Production 19.40 400 Overtime Production 1.5 x Regular Prod Cost 400 What is the TOTAL cost of the LEVEL plan over the planning horizon? Correct Answer 51,588.6 CAN SOMEONE SHOW ME HOW THEY GOT THE ANSWER 51588.6
Deb Bishop Health and Beauty Products has developed a new shampoo and you need to develop its aggregate schedule. The cost accounting department has supplied you the cost relevant to the aggregate plan and the marketing department has provided a​ four-quarter forecast.    the​ four-quarter forecast. Quarter Forecast 1 1,400 2 1,100 3 1,700 4 1,300    aggregate plan. Costs Previous​ quarter's output 1,600 units Beginning inventory 0 units Stockout cost for backorders ​$55 per unit Inventory holding cost ​$11 per unit for every unit held at the end of the quarter Hiring workers ​$50 per unit Layoff workers ​$75 per unit Unit cost ​$35 per unit Overtime ​$20 extra per unit Subcontracting Not available   Your job is to develop an aggregate plan for the next four quarters. Part 2 ​a) Try hiring and layoffs​ (to meet the​ forecast) as necessary ​(enter your responses as whole​…
Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: Click the icon to view the demand forecast. E Click the icon to view the cost data. John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: • Plan A: a strategy that hires and fires personnel as necessary to meet the forecast. • Plan B: a level strategy. • Plan C: a level strategy that produces 1,000 cases per quarter and meets the forecast demand with inventory and subcontracting. a) Which strategy is the lowest-cost plan? Try hiring and layoffs (to meet the forecast) as necessary (enter your responses as whole numbers). Hiring and Layoff Plan Layoff (Units) Hire Quarter Forecast Production Inits) 1,300 1 1,700 Costs/Other Data Previous quarter's output = 1,300 cases Beginning inventory = 0 cases Stockout cost of backorders = $140 per case Inventory holding cost = $45 per…

Chapter 11 Solutions

Operations Management

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Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY