question archive A manager has prepared a forecast of expected aggregate demand for the next six months
A manager has prepared a forecast of expected aggregate demand for the next six months
Subject:Operations ManagementPrice:2.87 Bought7
A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 100 units per month will be used. Back orders are allowed, and they are charged at the rate of $8 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $20 per unit and beginning inventory is zero.
Month Forecast
1 80
2 100
3 120
4 110
5 100
6 90
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Answer:
Aggregate Plan:
| Period | 1 | 2 | 3 | 4 | 5 | 6 |
| Forecast | 80 | 100 | 120 | 110 | 100 | 90 |
| Beginning Inventory | 0 | 20 | 20 | 0 | -10 | -10 |
| Production | 100 | 100 | 100 | 100 | 100 | 100 |
| Ending Inventory | 20 | 20 | 0 | -10 | -10 | 0 |
----
Costs:
| Period | 1 | 2 | 3 | 4 | 5 | 6 |
| Production | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 |
| Holding | 20 | 20 | ||||
| Backorder | 80 | 80 |
Total Cost = 2000*6 + 20*2 + 80*2 = $12200
Answer is $12200.
