Suppose you have been given responsibility for developing the six-month aggregate production plan at Fizzy 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 material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. Also assume Fizzy Galore always plans to hold 5000 cases of safety stock to meet unanticipated demand. January beginning inventory on hand is safety stock.

Current Workforce	8 workers
Average monthly worker output	4000 cases per month
Inventory holding cost	$0.30 per case per month
Regular wage rate	$20.00 per hour
Regular production hours / month	160 hours
Overtime wage rate	$30.00 per hour
Hiring cost	$1000 per worker
Subcontracting cost	$1.15 per case
Layoff cost	$1500 per worker
Beginning inventory (safety stock)	5000

You have been asked to evaluate the cost of a level plan and a chase plan in order to make a recommendation

Aggregate Production Plan - Level

Month	Jan.	Feb.	March	April	May	June	Total
Demand	24000	32000	32000	48000	60000	44000	240000
Production
Overtime/Subcontract
Ending Inventory
Stockouts
Labor (8 beginning)
Workers
New Hires
Layoffs

Inventory carrying costs:
Stockout cost:
OT/Sub costs
Hiring costs:
Layoff costs:
Production Cost
Total costs: