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Lesson 16 Aggregate Planning Solutions Solved Problem #1: See textbook Solved Problem #2: See textbook #1: Refer to Lesson Example 1: Planners for a company that makes several models of tractors are about to prepare an aggregate plan that will cover 6 periods. They have assembled the following cost information: Output Costs Regular time 2 per tractor Overtime 3 per tractor Subcontract 6 per tractor In
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   1 Lesson 16 Aggregate Planning Solutions Solved Problem #1: See textbook Solved Problem #2: See textbook #1: Refer to Lesson Example 1: Planners for a company that makes several models of tractors are about to  prepare an aggregate plan that will cover 6 periods. They have assembled the following cost information: Output Costs Regular time 2 per tractor Overtime 3 per tractor Subcontract 6 per tractor Inventory Costs 1 per tractor per period on average inventory Backorder Costs 5 per tractor per period As you recall, the level capacity plan using 300 tractors per period produced a plan which cost $4,700. Also, we saw that the backorder quantity was 100 in period 5 with a cost of $500. Management has discussed the backorder situation with the production staff and they have agreed that the  backorders can be eliminated if they work overtime. The production staff is also aware if they work overtime in earlier months that they will be able to take some time off in a later month.   2 Use a maximum of 300 regular time production units, with an overtime strategy: Develop a plan which will lower costs and eliminate the backorder problem. Show your plan in the following table. Note: you do not need to enter cells which have a value of 0. Period 1 2 3 4 5 6 Total Forecast 200 200 300 400 500 200 1,800 Production Schedule Regular Time 300 300 300 300 300 200 1700 Part Time Overtime 25 25 25 25 100 Subcontract Production - Forecast 125 125 25 -75 -200 Inventory Beginning 125 250 275 200 Ending 125 250 275 200 Average 62.5 187.5 262.5 237.5 100 Backorder Costs: Regular @ 2 600 600 600 600 600 400 3,400 Part Time @ Overtime @ 3 75 75 75 75 300 Subcontract @ 6 Hire/Lay off Inventory @ 1 62.5 187.5 262.5 237.5 100 850 Back orders @ 5 Total 737.5 862.5 937.5 912.5 700 400 4,550 Explain the cost differences between the two plans. Regular time costs went down $200 from $3,600 to $3,400 Overtime costs went up $300 from $0 to $300 Inventory costs went up $250 from $600 to $850 Backorder costs went down $500 from $500 to $0 Total costs went down $150 from $4,700 to $4,550 If you were one of the production staff, would you be happy with this plan? Yes, while I had to work more overtime in the first 4 periods, I got to take time off in the 6 th  period. Looking at the impact to me, I worked the same amount of hours over the 6 periods and got paid $100 more than if I had worked the srcinal schedule. Customers did not have to wait on their orders and the company cost was also $150 less, so it was a win-win proposition for everyone involved.   3 #2: Manager T.C. Downs of Plum Engines, a producer of lawn mowers and leaf blowers, must develop an aggregate plan for the engine department for the forecast shown below: 1 2 3 4 5 6 Forecast 120 135 140 120 125 125 The department has a normal capacity of 130 engines per period. The costs are shown below: Output Costs Regular time (normal output) $60 per engine Overtime $90 per engine Inventory Costs $2 per engine per period on average inventory Backorder Costs $90 per engine per period Beginning inventory is 0 engines. a.   Develop a chase strategy using normal output and overtime. Show your plan in the following table. Note: you do not need to enter cells which have a value of 0. Period 1 2 3 4 5 6 Total Forecast 120 135 140 120 125 125 765 Production Schedule Regular Time 120 130 130 120 125 125 750 Part Time Overtime 5 10 15 Subcontract Production - Forecast Inventory Beginning Ending Average Backorder Costs: Regular @ 60 7,200 7,800 7,800 7,200 7,500 7,50045,000 Part Time @ Overtime @ 90 450 900 1,350 Subcontract @ Hire/Lay off Inventory @ 2 Back orders @ 90 Total 7,200 8,250 8,700 7,200 7,500 7,50046,350   4  b.   Develop a level capacity plan that uses inventory to absorb fluctuations. Show your plan in the following table. Note: you do not need to enter cells which have a value of 0. Note: half units are acceptable. Period 1 2 3 4 5 6 Total Forecast 120 135 140 120 125 125 765 Production Schedule Regular Time 127.5 127.5 127.5 127.5 127.5 127.5765 Part Time Overtime Subcontract Production - Forecast 7.5 -7.5 -12.5 5 2.5 2.5 Inventory Beginning 7.5 Ending 7.5 Average 3.75 3.75 Backorder 12.5 5 2.5 20 Costs: Regular @ 60 7,650 7/650 7,650 7,650 7,650 7,65045,900 Part Time @ Overtime @ 90 Subcontract @ Hire/Lay off Inventory @ 2 7.5 7.5 15 Back orders @ 90 1,125 450 225 1,800 Total 7,657.57,657.58,775 8,100 7,875 7,65047,715 c.   Compare the cost of the plan in a. and b. Regular time cost is $900 higher in b. than in a. Overtime time cost is $1,350 lower in b. than in a. Inventory cost is $15 higher in b. than a. Backorder cost is $1,800 higher in b. than in a. Total cost for b. is $1,365 higher in b. than in a. #3: Nowjuice, Inc. produces bottled pickled juice. A planner has developed an aggregate forecast for the demand (in cases) for the next six months as shown below: 1 2 3 4 5 6 Forecast 4,000 4,800 5,600 7,200 6,400 5,000 The costs are shown below: Output Costs Regular time (normal output) $10 per case
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