Ramesh knows that with two regular manufacturing shifts

he will be able to produce $7,000$ rugs per month. However, he

has realized that two shifts may not be enough, considering the

demand forecast he has received. Operating a third shift could

improve monthly production by a factor of up to $1\mathrm{.}5.$ However,

third shift production costs are $1\mathrm{.}5$ times higher than regular production

costs. Ramesh has calculated his current total production

cost per rug at $$120,$ although he sells to retailers at $$160.$ His average

annual inventory carrying cost is $20$ percent.

To meet the forecasted demand, Ramesh has the following

three options:

$1.$ Use a level aggregate plan strategy.

$2.$ Use a chase aggregate plan strategy.

$3.$ Use a hybrid aggregate plan strategy.

Case Questions

$1.$ Which option should Ramesh choose? Why?