An automobile component supply company is planning for next year's market and is currently reviewing its...

  

Transcribed Image Text:

An automobile component supply company is planning for next year's market and is currently reviewing its aggregate plan. The Manufacturing Director (MD) has received the demand in aggregate units from its major customer as shown in Table Q4 below. Time Period (month) I 2 3 4 5 6 Customer Order (in 1,000 units) 30 30 30 60 7 60 60 90 8 90 9 10 11 12 90 90 90 90 Table Q4 The Sales Director predicts that next year the automobile market is good and requests the MD to expand capacity and build up additional inventory for any unexpected increase in demand. Since the MD is responsible for the overall production strategy and aggregate plan, it is important to adopt and execute an optimal production plan and scheduling to handle market demand. The planning horizon is 6 months and all resources must be sufficient to meet the capacity requirement of the planning horizon with no shortages allowed. The MD reviews the production policy and the Financial Director determines production at regular time when the cost is $13 per unit, during overtime the cost is $15 per unit or to subcontract at a cost of $20 per unit. The inventory holding cost is $1 per unit per month, and there is no holding cost by subcontracting. The production plant has a regular production capacity of 30,000 units per month and overtime production capacity of 30,000 units per month. The plant will operate 4 weeks or 24 days per month. Subcontractor capacity is limited to 30,000 units per month and is subject to change. Based on the above scenario, (a) The MD decides to adopt a matching strategy in the first 6 months (Months 1 to 6) of production. Furthermore, there is no initial inventory in the warehouse and the plan is to produce extra quantity of 30,000 units per month every month for use as buffer stock for the second half of the year. The policy is that subcontracting is allowed in the first 6 months and to stop subcontracting in the next 6 months (Month's 7 to 12). (i) Use the Production Planning Spread Sheet (PPSS) method with the attached spread sheet to determine the minimum cost aggregate production plan for Period 1 to Period 6 ONLY. (12 marks) (ii) Determine the total regular cost, total extra cost, and total cost of your inventory holding cost in the extra cost. Show all your calculations. plan. Include (6 marks) An automobile component supply company is planning for next year's market and is currently reviewing its aggregate plan. The Manufacturing Director (MD) has received the demand in aggregate units from its major customer as shown in Table Q4 below. Time Period (month) I 2 3 4 5 6 Customer Order (in 1,000 units) 30 30 30 60 7 60 60 90 8 90 9 10 11 12 90 90 90 90 Table Q4 The Sales Director predicts that next year the automobile market is good and requests the MD to expand capacity and build up additional inventory for any unexpected increase in demand. Since the MD is responsible for the overall production strategy and aggregate plan, it is important to adopt and execute an optimal production plan and scheduling to handle market demand. The planning horizon is 6 months and all resources must be sufficient to meet the capacity requirement of the planning horizon with no shortages allowed. The MD reviews the production policy and the Financial Director determines production at regular time when the cost is $13 per unit, during overtime the cost is $15 per unit or to subcontract at a cost of $20 per unit. The inventory holding cost is $1 per unit per month, and there is no holding cost by subcontracting. The production plant has a regular production capacity of 30,000 units per month and overtime production capacity of 30,000 units per month. The plant will operate 4 weeks or 24 days per month. Subcontractor capacity is limited to 30,000 units per month and is subject to change. Based on the above scenario, (a) The MD decides to adopt a matching strategy in the first 6 months (Months 1 to 6) of production. Furthermore, there is no initial inventory in the warehouse and the plan is to produce extra quantity of 30,000 units per month every month for use as buffer stock for the second half of the year. The policy is that subcontracting is allowed in the first 6 months and to stop subcontracting in the next 6 months (Month's 7 to 12). (i) Use the Production Planning Spread Sheet (PPSS) method with the attached spread sheet to determine the minimum cost aggregate production plan for Period 1 to Period 6 ONLY. (12 marks) (ii) Determine the total regular cost, total extra cost, and total cost of your inventory holding cost in the extra cost. Show all your calculations. plan. Include (6 marks)

Answer rating: 100% (QA)

Total Regular Cost 180000 Total Extra Cost 0 Total Cost 180000 The Production Planning Spreadsheet P... View the full answer