Question: Problem 13-1 (Algo) Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your
Problem 13-1 (Algo)
Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are.
The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4.
The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime.
TABLE 13-3 Monthly Demand at Soda Galore
| Month | Demand Forecast | |
| January | 16,000 | cases |
| February | 32,000 | cases |
| March | 32,000 | cases |
| April | 32,000 | cases |
| May | 40,000 | cases |
| June | 40,000 | cases |
| Total Demand | 192,000 | cases |
| Average Monthly Demand | 32,000 | cases |
TABLE 13-4 Soda Galore Planning Data
| Current workforce | 6 | workers | |
| Average monthly output per worker | 4,000 | cases per month | |
| Inventory holding cost | $ | 0.60 | per case per month |
| Regular wage rate | $ | 20.00 | per hour |
| Regular production hours/month/worker | 280 | hours | |
| Overtime wage rate | $ | 30.00 | per hour |
| Hiring cost | $ | 1,000 | per worker |
| Subcontracting cost | $ | 2.15 | per case |
| Firing/layoff cost | $ | 1,500 | per worker |
| Beginning inventory | 4,000 | (all safety stock) | |
Assume that employees negotiate an increase in the regular production wage rate to $24 per hour and $36 per hour for overtime. Assume Soda Galore always plans to hold at least 4,000 cases of safety stock to meet unanticipated customer demand. Also assume that hiring and layoff/firing, if necessary, occur at the beginning of the month.
e. After much internal discussion, the company decides to maintain a permanent workforce of 6 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. (Leave no cells blank - be certain to enter "0" wherever required.)
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f. Determine the cost of the hybrid production plan. Use the overtime cost.
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