A company€™s production planner for the company€™s popular product has developed the following demand forecast and the perunit regular time production cost information for the first 6 months of 2016. Due to seasonal factors, the cost of regular time production is not constant. Overtime can be used up to a maximum of 100 units each month at 150% of the regular time production cost for that month. Production of units can be subcontracted at a cost of $150 per unit. The inventory holding cost is $5 per unit per month. The inventory level at the beginning of the planning horizon is 100 units and the inventory level at the end of the planning horizon should be zero. No backlogs are allowed:

Using this information, develop aggregate plans for the following three scenarios and compute the total cost of each plan:

1. Use a level production strategy and use overtime when needed.

2. Use a combination of overtime, inventory, and subcontracting to absorb demand variations.

3. Use a chase production strategy.

4. Which plan yields the lowest cost?

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2 4 Month 1,200 1,500 1,700 1,300 900 Forecast 700 100 100 Production cost in $ per unit 95 105 100 90