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	24,000	cases
February	36,000	cases
March	32,000	cases
April	40,000	cases
May	24,000	cases
June	84,000	cases
Total Demand	240,000	cases
Average Monthly Demand	40,000	cases

TABLE 13-4 Soda Galore Planning Data

Current workforce		8	workers
Average monthly output per worker		4,000	cases per month
Inventory holding cost	$	0.60	per case per month
Regular wage rate	$	16	per hour
Regular production hours/month/worker		240	hours
Overtime wage rate	$	24.00	per hour
Hiring cost	$	1,000	per worker
Subcontracting cost	$	1.70	per case
Firing/layoff cost	$	1,500	per worker
Beginning inventory		7,000	(all safety stock)

Assume that employees negotiate an increase in the regular production wage rate to $20 per hour and $30 per hour for overtime. Also assume that Soda Galore always plans to hold at least 7,000 cases of safety stock to meet unanticipated customer demand. Assume that hiring and layoff/firing, if necessary, occur at the beginning of the month.

a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.)

Level Production Plan
Month	Demand	Regular Production	Overtime or Subcontract Production	Ending Inventory	Workers Required (4,000 cases/worker)	Hire	Fire layoff
Jan.	24,000	40,000	0	23,000	10	2	0
Feb.	36,000	40,000	0	27,000	10	0	0
March	32,000	40,000	0	35,000	10	0	0
April	40,000	40,000	0	35,000	10	0	0
May	24,000	40,000	0	51,000	10	0	0
June	84,000	40,000	0	7,000	10	0	0
Total	240,000	240,000	0	178,000		2	0

b. Determine the cost of the level production plan.

	Total cost ???????????????????

c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "0" wherever required.)

Chase Production Plan : Adjust Workforce Size
Month	Demand	Regular Production	Overtime or Subcontract Production	Ending Inventory	Workers Required (4,000 cases/worker)	Hire	Fire layoff
Jan.	24,000	24,000	0	7,000	6	0	2
Feb.	36,000	36,000	0	7,000	9	3	0
March	32,000	32,000	0	7,000	8	0	1
April	40,000	40,000	0	7,000	10	2	0
May	24,000	24,000	0	7,000	6	0	4
June	84,000	84,000	0	7,000	21	15	0
Total	240,000	240,000	0	42,000		20	7

Overtime or Subcontract
Month	Demand	Regular Production	Overtime or Subcontract Production	Ending Inventory	Workers Required (4,000 cases/worker)	Hire	Fire layoff
Jan.	24,000	24,000	0	7,000	6	0	2
Feb.	36,000	24,000	12,000	7,000	6	0	0
March	32,000	24,000	8,000	7,000	6	0	0
April	40,000	24,000	16,000	7,000	6	0	0
May	24,000	24,000	0	7,000	6	0	0
June	84,000	24,000	60,000	7,000	6	0	0
Total	240,000	144,000	96,000	42,000		0	2

d. Determine the cost of the chase production plan.

Total cost if workforce size adjusted	???????????????
Total cost if overtime production used	???????????????
Total cost if subcontracting used	???????????????

e. After much internal discussion, the company decides to maintain a permanent workforce of 8 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.)

Hybrid Plan
Month	Demand	Regular Production	Overtime or Subcontract Production	Ending Inventory	Workers Required (4,000 cases/worker)	Hire	Fire layoff
Jan.	24,000	32,000	0	15,000	8	0	0
Feb.	36,000	32,000	0	11,000	8	0	0
March	32,000	32,000	0	11,000	8	0	0
April	40,000	32,000	4,000	7,000	8	0	0
May	24,000	32,000	0	15,000	8	0	0
June	84,000	32,000	44,000	7,000	8	0	0
Total	240,000	192,000	48,000	66,000		0	0

f. Determine the cost of the hybrid production plan. Use the overtime cost.

Total cost

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