Chris Fisher, owner of an Ohio firm that manufactures display cabinets, develops an 8-month aggregate plan. Demand and capacity (in units) are forecast as follows:

The cost of producing each unit is $1,000 on regular time, $1,300 on overtime, and $1,800 on a subcontract. Inventory carrying cost is $200 per unit per month. There is no beginning or ending inventory is stock, and no backorders are permitted from period to period.
(a) Set up a production plan that minimizes cost by producing exactly regular time first, then overtime, and then subcontracting. This plan allows no backorders or inventory. What is this plan’s cost?
(b) Through better planning, regular-time production can be set at exactly the same amount, 275 units, per month. Does this alter the solution?
(c) If overtime costs rise from $1,300 to $1,400, will your answer to part (a) change? What if overtime costs then fall to$1,200?

  • CreatedJuly 23, 2013
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