Beginning Inventory $400$

Demand Forecast $180015001100900110016008000$

Number of Working Days by Month $221921212220125$

Workers work $8$ hours per day

Costs

Materials $$100\mathrm{.}00$ $ per unit

Inventory holding cost $$1\mathrm{.}50$ $ per unit per month

Marginal cost of stockout $$5\mathrm{.}00$ $ per unit per month

Marginal cost of subcontracting $$20\mathrm{.}00$ $ per unit $($$$120$ less $$100$ material cost$)$

Hiring and training cost $$200\mathrm{.}00$ $ per worker

Layoff cost $$250\mathrm{.}00$ $ per worker

Labor hours required per unit $5\mathrm{.}0$ hours per unit

Straight$-$line cost $($first eight hours each day$)$ $$4\mathrm{.}00$ $ per hour

Overtime cost $($time and a half$)$ $$6\mathrm{.}00$ $ per hour

Aggregate Production Planning Requirements

January February March April May June

Beginning Inventory $400$

Demand Forecast

Safety Stock $(\mathrm{.}25$ x Demand Forecast$)$

Production Requirement

Ending Inventory

Exhibits $8\mathrm{.}4-$ Costs of Four Production Plans

Production Plan $1$: Exact Production; Vary Workforce

January February March April May June Total

Production Requirement

Production Hours Required

Working Days per Month

Hours per Month per Worker

Workers Required

New Workers Hired $53$

Hiring Cost

Workers Laid Off

Layoff Cost $($Workers Laid Off x $$250)$

Straight Time Cost

Total Cost

Production Plan $2$: Constant Workforce; Vary Inventory and Stockout

January February March April May June Total

Beginning Inventory

Working Days per Month

Production Hours Available $($Working Days per

Month x $8$ Hr$./$Day x $40$ Workers$)*$

Actual Production $($Production Hours Available$/5$

Hr$./$Unit$)$

Demand Forecast

Ending Inventory $($Beginning Inventory $+$ Actual

Production $-$ Demand Forecast$)$

Shortage Cost $($Units Short x Cost of Stockout$)$

Safety Stock

Units Excess $($Ending Inventory $-$ Safety Stock$)$

Inventory Cost $($Units Excess x holding cost$)$

Straight Time Cost

Total Cost

Production Plan $3$: Constant Low Workforce; Subcontract

January February March April May June Total

Production Requirement

Working Day per Month

Production Hours Available $($Working Day x $8$

Hrs$./$Day x $25$ Workers$)*$

Actual Production $($Production Hours Available$/5$

hr$.$per Unit$)$

Units Subcontracted $($Production Requirement $-$

Actual Production$)$

Subcontracting Cost $($Units Subcontracted x

Subcontracting cost$)$

Straight Time Cost

Total Cost

Production Plan $4$: Constant Workforce; Overtime

January February March April May June Total

Beginning Inventory

Working Days per Month

Production Hours Available $($Working Days x $8$

Hr$./$Day x $38$ Workers$)$

Regular Shift Production $($Production Hours

Available $/5$ hrs$.$ per Unit$)$

Demand Forecast $($From Exhibit $16\mathrm{.}3)$

Units Available before Overtime $($Beginning

Inventory $+$ Regular Shift Production $-$ Demand

Forecast$)$

Units Overtime

Overtime Cost $($Units Overtime x $$6/$Hr x $5$ hr$./$Unit$)$

Safety Stock $($From Exhibit $16\mathrm{.}3)$

Units Excessive $($Units Available before Overtime $-$

Safety Stock$)$

Inventory Cost $($Units Excessive x $$1\mathrm{.}50)$

Straight Time Cost

Total Cost